The Pass-Through Entity Tax

The pass-through entity (PTE) tax is a state-level income tax imposed directly on a partnership or S corporation (rather than on its owners), which the entity deducts in computing its federal taxable income [1].

The key federal benefit is that this entity-level deduction is not subject to the individual $10,000 SALT cap. The tax payment reduces the partners' or shareholders' distributive/pro rata share of income reported on Schedule K-1 rather than being a separately stated item, so it never flows through to the individual's return in a way that triggers the SALT limitation [1].

The deduction is allowed regardless of whether the entity elected into the tax or whether the owners receive a corresponding state-level credit or deduction for their share of the payment [1].

I can go deeper into state-specific PTE elections or the accrual-method timing question if useful.