Free tool · S-corps & partnerships
California PTET calculator
The $10,000 SALT cap is silently eliminating most California business owners’ state tax deduction. The Pass-Through Entity Tax election moves that deduction to the entity level — no cap, full federal savings. This tool shows you exactly how much you’re leaving on the table.
Who this is for
S-corp owners and multi-member LLC / partnership members with California income. If you’re a sole proprietor or single-member LLC, PTET doesn’t apply to you.
Educational estimate — not tax advice. Confirm the election and payment mechanics with your CPA.
Your situation
The qualified net income flowing through to you — after salary, before distributions
The rate on your highest dollar of income — check last year’s return or estimate based on total income
~$197k–$250k taxable income (single)
California homeowners typically pay $5k–$10k in property taxes alone. This determines how much of the $10k SALT cap is already consumed before your business income taxes.
Annual federal tax savings with PTET
$4,248
2.4% effective rate reduction on your business income
3-year value
$12,744
5-year value
$21,240
Without PTET election
CA taxes buried in SALT
CA income tax on business income
175,000 × 9.3%
$16,275
Your SALT budget
$10,000
Already used by property tax / other
($7,000)
Remaining SALT for CA income tax
$3,000
CA income tax actually deductible
Capped — rest is lost
$3,000
Federal savings on deduction
32.0% × $3,000
$960
CA tax lost to SALT cap (wasted)
$13,275
With PTET election
Full deduction, no cap
PTET paid by entity
Entity writes the check to FTB
$16,275
Federal deduction for PTET payment
Business expense — no SALT cap
$16,275
CA credit received by owner
Offsets your personal CA tax liability
$16,275
Net CA tax paid (entity + credit)
You're not double-paying California
Same as before
Federal savings on PTET deduction
32.0% × $16,275
$5,208
CA tax recovered (was wasted before)
$13,275
Federal savings without PTET
$960
What you’re currently getting
Federal savings with PTET
$5,208
What you’d get with the election
Net annual savings
$4,248
Additional federal deduction unlocked
Who qualifies for PTET
S-corporations with California activity
Multi-member LLCs (taxed as partnerships)
Partnerships with California-resident partners
Sole proprietors — not eligible
Single-member disregarded LLCs — not eligible
C-corporations — already deduct state taxes
The June 15 prepayment deadline
To take the federal deduction this year, your entity must prepay the PTET to the FTB by June 15 of the tax year. If you miss June 15, you still get the California credit — but the federal deduction shifts to next year.
For a calendar-year business, that means: pay by June 15, 2026 to deduct it on your 2026 federal return. This requires cash flow planning — your CPA should flag this in Q2.
How the money actually moves
- 01
Your entity (S-corp or partnership) elects PTET on its tax return (by the return due date — March 15 for S-corps).
- 02
The entity pays the PTET to the FTB — 9.3% of qualified net income. To get the current-year federal deduction, this must be paid by June 15 of the tax year.
- 03
The PTET payment is a deductible business expense on the entity's federal return. This reduces the income flowing through to you on your K-1 — and bypasses the $10k SALT cap entirely.
- 04
You claim a California PTET credit on your personal CA 540. The credit is dollar-for-dollar and is refundable (for 2022+) — so you won't overpay California.
- 05
Net result: your CA income taxes are the same dollar amount, but they're now deducted federally as a business expense instead of a capped personal deduction. The difference is real federal tax savings.
Estimates use a 9.3% California PTET rate (the rate that applies to most S-corporations). Partnerships with multiple partners at different income levels may have a blended rate that differs. The PTET credit is refundable for California tax years beginning on or after January 1, 2022. This tool models the federal tax benefit only — confirm the election timing, payment method, and return treatment with your CPA.
Why PTET matters for California S-corp owners
The 2017 Tax Cuts and Jobs Act capped the federal deduction for state and local taxes at $10,000. For California business owners with property taxes, W-2 income, and business income, that cap is routinely exceeded. California’s AB 150 (2021) created a legal workaround.
The problem: SALT cap
California income tax rates go up to 13.3%. A business owner with $200k of S-corp income owes $18,600 in CA income tax — but can only deduct $10k of combined state and local taxes federally. Most of that CA tax simply disappears.
The solution: entity-level payment
PTET shifts the CA income tax payment from the owner's personal return to the entity's books. Business expenses aren't subject to the SALT cap — they're fully deductible. Same dollars, different line on the return.
The credit makes it a wash for CA
To prevent double taxation, California gives the owner a personal credit equal to the PTET paid. You don't pay CA twice. You're simply rerouting the CA payment to get the federal deduction.
The credit is refundable
For tax years beginning on or after January 1, 2022, the California PTET credit is refundable. If the credit exceeds your personal CA tax liability, you get the difference back — you're not leaving any credit on the table.
It has to happen before June 15
The entity must prepay the PTET to the FTB by June 15 of the tax year to deduct it in that year. If you miss June 15, the deduction shifts to the following year. Your CPA needs to flag this in Q1.
The election is annual
You elect PTET each tax year — it's not permanent. This is actually useful: if your income or deductions change, you can re-evaluate whether to elect each year.
PTET in the context of your full tax picture
PTET is one piece of proactive CA tax planning. The full picture for an S-corp owner includes:
PTET Election
Recover the SALT cap loss on CA income taxes.
OpenS-Corp Salary
Right-size your W-2 to maximize SE tax savings without triggering audit risk.
OpenQBI Deduction
The 20% pass-through deduction — and how your salary affects it.
OpenRetirement Contributions
Maximize Solo 401(k) contributions to lower taxable income before year-end.
OpenWork with us
PTET is a one-conversation fix.
If your CPA hasn’t brought up the PTET election, it may simply not be on their radar. A 30-minute review of your S-corp structure, salary, and PTET eligibility is typically where the biggest savings live.
Talk with Matt