PTET Decision Calculator

Models federal tax benefit of state PTET election under OBBBA SALT cap rules (2025–2029) — single-owner simplification

How this works: Compares two scenarios for a single owner — (A) no PTET: owner pays state tax personally, deducts on Schedule A subject to OBBBA's $40K SALT cap with phaseout above $500K MAGI; (B) PTET elected: entity pays state tax (reducing K-1 ordinary income), owner gets refundable state credit. The federal benefit comes ONLY from the portion of state tax that would otherwise hit the SALT cap. QBI haircut: If owner is QBI-eligible, PTET reduces K-1 income, which reduces the QBI deduction by 20¢ per $1 — this is a real cost when the SALT cap isn't binding.

Inputs

State (auto-fills PTET & individual rates)

State PTET rate (%)

State individual rate (%)

Owner's effective state rate

Pass-through income to this owner ($)

K-1 ordinary income before any PTET reduction

Federal marginal rate

Top marginal bracket for owner's federal taxable income

Owner MAGI ($)

Determines effective SALT cap (OBBBA phaseout starts $500K)

Filing status

Other Schedule A SALT already used ($)

Property tax + other state/local taxes already on Sch A

QBI eligibility

SSTB owners over thresholds, or non-QBI activities = ineligible

State credit type

Most states refundable. CA = 5-yr CF; AZ, IL = CF

Resident of PTET state?

Non-residents: verify resident-state grants credit (PA traps partnership owners)

Net Annual Federal Benefit of PTET Election

—

Adjust inputs to see analysis

Scenario A — No PTET

Owner K-1 income—

State tax owed by owner—

SALT deduction (Sch A)—

QBI deduction—

Federal taxable income (this slice)—

Federal tax—

Scenario B — PTET Elected

Entity PTET payment—

Owner K-1 income (post-PTET)—

Owner net state tax (after credit)—

SALT deduction (Sch A)—

QBI deduction—

Federal taxable income (this slice)—

Federal tax—

Diagnostics

Effective SALT cap (after MAGI phaseout)—

Available SALT cap headroom (after other taxes)—

State tax that would otherwise EXCEED SALT cap—

Federal benefit per $1 PTET (effective rate)—

Rate gap penalty (PTET rate − individual rate)—

5-year cumulative net benefit (recurring)—

Calculation Methodology

The calculator computes federal taxable income for the owner's slice attributable to the elected PTE under each scenario:
• Scenario A (no PTET): Federal taxable = K-1 income − QBI deduction − min(state tax owed, SALT cap available)
• Scenario B (PTET): Federal taxable = K-1 income × (1 − PTET rate) − QBI on reduced income − min(state tax net of credit, SALT cap available)
Net federal benefit = (Scenario A − Scenario B) × federal marginal rate. The QBI haircut is automatic: PTET reduces K-1 income, which reduces 20% QBI deduction, costing m × p × q on every dollar regardless of cap status.

OBBBA SALT Cap Phaseout (2025–2029)

Cap starts at $40K MFJ ($20K Single) for 2025. Above $500K MAGI ($250K Single), cap reduces by 30¢ per $1 over threshold until floor at $10K ($5K Single). At MAGI = $600K MFJ, cap is fully reverted to $10K. After 2029, current law: cap reverts to $10K for all.

Simplifications & Limitations

This calculator does NOT model: (1) multi-owner entities with mixed residency / consent issues; (2) multi-state apportionment and resident credit interaction; (3) AMT; (4) QBI W-2 wage limitation or UBIA limitation (assumes 20% deduction works fully); (5) state-specific add-backs that change the QBI base; (6) underpayment penalties for missed estimates (especially WI 12%/yr); (7) NIIT 3.8% (PTET payment doesn't reduce NIIT base since it's still pass-through income for NIIT). For close-call decisions, model in Intuit Tax Advisor or full tax software with actual return data.

Tie-In to Intuit Tax Advisor Workflow

ITA includes "Pass-Through Entity Tax" as a built-in tax planning strategy. To model: (1) pull baseline projection from ProConnect-synced data; (2) under "Strategies," enable "PTET" and enter projected PTET amount and refundable credit details; (3) ITA will recalculate the K-1 income, state credit application, and federal benefit; (4) compare baseline vs PTET scenario in the side-by-side projection. Use this calculator for quick directional sanity-check before committing to full ITA modeling — particularly to validate whether the SALT cap is even binding for the client.

Decision Heuristics

STRONGLY ELECT when: owner MAGI > $600K (cap fully at $10K) + QBI not the binding factor + state PTET rate ≤ individual rate + refundable credit. LIKELY SKIP when: owner MAGI < $500K + QBI eligible + state tax falls within $40K cap (rare exception: very high state rate with significant pass-through income). CASE-BY-CASE: owners in $500K–$600K phaseout zone; states with rate inversion (WI 7.9% PTET vs 7.65% individual); non-refundable credits with prior-year carryforwards already accumulated.