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The PTE tax strategy is changing in 2026 but it is NOT going away. If your accountant told you to stop using the pass through entity tax strategy because the SALT cap increased to $40,000, they are wrong. In this podcast, I break down exactly what changed with the PTE tax strategy, why the $40,000 SALT deduction limit is misleading for profitable business owners, and why the PTE pass through entity tax election is more important now than ever.

In 2017, the Tax Cuts and Jobs Act put a $10,000 cap on state and local tax deductions, also known as the SALT cap. That meant business owners who were paying $30,000, $40,000, or even $200,000 in state income taxes could only deduct $10,000 on their personal tax return. States fought back and created the PTE pass through entity tax, which lets S corporation and LLC owners convert personal state income taxes into a business tax deduction. This strategy has saved our clients tens of thousands of dollars every year.

Now in 2026, the One Big Beautiful Act raised the SALT cap from $10,000 to $40,000. A lot of accountants are telling their clients the PTE strategy is no longer needed. Here is what they are missing: there is a modified adjusted gross income phase out. If your total income is $500,000 or more, the $40,000 SALT cap starts dropping. If your income is $600,000 or more, your SALT cap goes right back down to $10,000. That means the PTE tax strategy is still critical for every profitable S corporation and LLC owner.

I also walk you through exactly how to make a PTE election, when the deadlines are by state, why you should pay your PTE taxes quarterly, and how to claim the PTE tax credit on your personal return. If you are not using the pass through entity tax strategy with your tax advisor, you are overpaying in taxes.

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