The SALT Cap and the PTET Election

Federal law now caps the individual state and local tax deduction at $40,400 for 2026, rising one percent annually through 2029 and reverting to $10,000 in 2030. Above $505,000 of modified adjusted gross income, the cap phases down 30 cents per dollar to a $10,000 floor, gone entirely near $606,333. Entity-level taxes remain fully deductible, which makes the pass-through entity tax election the deduction still working at high incomes. California extended its regime through 2030 and softened the June 15 prepayment cliff: a shortfall now reduces owner credits by 12.5 percent of the unpaid share instead of voiding the election. The election, the prepayment, and the section 199A interaction have to be modeled entity by entity, not assumed.

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