The SALT deduction cap's continued presence at $10,000 per household creates significant complexity for residents of high-tax states. This page examines how some states have structured SALT workarounds and whether those workarounds survive the new legislation.
Pass-Through Entity Tax Workarounds
Many high-tax states created pass-through entity taxes that allowed business owners to deduct state taxes at the entity level, bypassing the individual SALT cap. This bill preserves the IRS's 2020 guidance allowing PTE taxes but adds new guardrails.
Core Takeaway
Business owners in states with PTE elections — New York, New Jersey, California, Massachusetts — should confirm their current PTE structure complies with the new guardrails. Non-compliant structures may be recharacterized, eliminating the deduction.