Lower Your Tax Bill: What Small Business Owners Need to Know About SALT Caps, PTET Elections & the QBI Deduction

Written By Phillip Dishion

If you’re a small business owner, especially one operating as an S corporation or partnership, you may be missing out on significant tax savings — or unknowingly leaving money on the table.

In this post, we break down three powerful tax strategies that every business owner should understand for 2025 and beyond:

  • The SALT deduction cap

  • The PTET (Pass-Through Entity Tax) election

  • The QBI (Qualified Business Income) deduction

🧾 The $10,000 SALT Cap — Still Here

The State and Local Tax (SALT) deduction cap, originally introduced in 2018, limits the amount of state income and property taxes you can deduct on your federal return to $10,000 per year.

This cap disproportionately affects high-income earners and business owners in higher-tax states. Unfortunately, under the One Big Beautiful Bill Act (OBBBA), the SALT cap remains in place and is now effectively permanent.

💼 The PTET Workaround: A SALT Solution for S Corps and Partnerships

Many states — including Kentucky — offer a solution known as the Pass-Through Entity Tax (PTET) election.

Here’s how it works:

  • Your entity pays state income taxes on your business profits

  • That tax becomes a federally deductible business expense

  • You receive a credit on your personal return to avoid double taxation

✅ This strategy effectively bypasses the SALT cap, allowing business owners to deduct state taxes that would otherwise be limited.

Note:

PTET is only available to S corporations and partnerships

Sole proprietors and disregarded entities do not qualify

You must elect PTET each year — it’s not automatic

🧾 The QBI Deduction — Still in Play (and Now Permanent)

The Qualified Business Income (QBI) deduction allows eligible business owners to deduct up to 20% of their qualified pass-through income on their federal tax return.

The OBBBA made the deduction permanent, but the limitations still apply for Specified Service Trades or Businesses (SSTBs) like:

  • Accounting

  • Law

  • Consulting

  • Healthcare

If you're in an SSTB, your eligibility for the deduction phases out once your taxable income exceeds:

  • $400,000 for married filing jointly

  • $200,000 for single filers
    (2025 estimates; indexed for inflation)

📌 How These Three Strategies Work Together

Here’s how they interact for maximum savings:

Tax StrategyWhat It DoesWho Can Use ItSALT CapLimits deduction of state taxesAll individual taxpayersPTET ElectionAllows full deduction of state taxes via businessS corps and partnershipsQBI DeductionUp to 20% pass-through deductionPass-through owners below income thresholds

Used together, these tools can reduce both your business and personal tax liabilities — but they require proactive planning.

✅ What You Should Do Now

  • Confirm whether your business qualifies for PTET and make the election annually

  • Review your QBI eligibility based on 2025 income projections

  • Adjust your salary or distributions if you're close to QBI phaseout limits

  • Work with your CPA to integrate these strategies into your tax plan

Let’s Make Sure You’re Taking Advantage

At Dishion & Associates, we help business owners build smarter tax strategies using tools like the PTET election and QBI deduction — so you can pay what you owe, and not a penny more.

Schedule a consultation and let Dishion & Associates take bookkeeping off your plate. Book your consult here.

Phillip Dishion
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The 2025 Tax Reform (OBBBA): What Small Business Owners Need to Know