PTETaxDesk / 2026 State PTET & $40k SALT Guides / Does Electing State PTET Reduce Your 20% Section 199A QBI Deduction in 2026?
Does Electing State PTET Reduce Your 20% Section 199A QBI Deduction in 2026?
Does Electing State PTET Reduce Your 20% Section 199A QBI Deduction in 2026??
Under IRS Notice 2020-75, state PTET reduces the pass-through entity ordinary business income (QBI), which reduces the 20% Section 199A QBI deduction on that amount; however, for SSTB owners between $394,600 and $544,600 MFJ, lowering taxable income via PTET can actually unlock a larger QBI deduction.
Under IRS Notice 2020-75, state PTET reduces the pass-through entity ordinary business income (QBI), which reduces the 20% Section 199A QBI deduction on that amount; however, for SSTB owners between $394,600 and $544,600 MFJ, lowering taxable income via PTET can actually unlock a larger QBI deduction.
Open 2026 $40,000 SALT Cap vs. State PTET Calculator
2026 PTET & SALT Compliance Checklist
- Adopt a Written Partner/Shareholder PTET Consent Resolution: Keep signed authorization in your corporate or partnership minute book.
- Remit Cash-Basis Vouchers Before December 31, 2026: Under IRS Notice 2020-75, cash-basis entities can deduct 2026 PTET only to the extent paid by December 31, 2026.
- Avoid Overpayment Refunds (IRC § 111): Base your Q4 PTET payment on actual projected 2026 state liability so next year's state refund isn't recaptured as ordinary federal income.
Frequently Asked Questions
Does Electing State PTET Reduce Your 20% Section 199A QBI Deduction in 2026??
Under IRS Notice 2020-75, state PTET reduces the pass-through entity ordinary business income (QBI), which reduces the 20% Section 199A QBI deduction on that amount; however, for SSTB owners between $394,600 and $544,600 MFJ, lowering taxable income via PTET can actually unlock a larger QBI deduction.