The One Big Beautiful Bill Act (OBBBA) increased the annual cap on the personal deduction for state and local taxes (SALT) from $10,000 to $40,000 for 2025 through 2029.

Does this mean it is no longer worthwhile for pass-through entities (PTEs) to pay state pass-through entity taxes? No, it does not.

Many PTE owners can still benefit by having their businesses pay such taxes instead of paying them personally.

What Are Pass-Through Entity Taxes?

Pass-through entity taxes (PTETs) came about when the Tax Cuts and Jobs Act (TCJA) imposed a $10,000 annual cap on the state and local tax deduction in 2018. The $10,000 cap made it impossible for many taxpayers in high-tax states to fully deduct their homeownership real estate property taxes and state income taxes.

PTETs provided a workaround for owners of pass-through business entities—partnerships, limited partnerships, multimember LLCs, and S corporations.

The idea behind PTETs is simple: A pass-through entity such as a multimember LLC, a partnership, or an S corporation elects to pay the state income tax due on the PTE’s business income that otherwise would have passed through the PTE and been paid by the PTE’s owners on their personal tax returns.

The PTE—say, your S corporation—then claims a federal business expense deduction for the state income tax payments. The PTE’s deduction for ... Log in to view full article.