PTET Workaround Eliminated: What It Means for Florida Small Business Owners in 2025

A SALT Strategy Under Fire: What’s Changing in 2025?

As we move through the 2025 tax year, small business owners and tax professionals are watching closely as many states begin rolling back their Pass-Through Entity Tax (PTET) programs. These PTET elections have served as crucial workarounds to the federal $10,000 State and Local Tax (SALT) deduction cap.

With this PTET workaround eliminated or limited in several states, questions are swirling about its future and how Florida-based taxpayers could be affected.

Interesting Fact: According to the Tax Foundation, more than 30 states implemented PTET elections as of 2024—but several are now reevaluating or rolling back those laws in anticipation of the SALT cap expiring at the end of 2025.

Florida’s Unique Tax Landscape

Here’s the twist: Florida does not impose a personal state income tax. That means Florida never offered a PTET election because there’s no state income tax to offset at the individual level. While residents in high-tax states like New York and California saw major federal deduction limits due to the $10,000 SALT cap, Floridians have been largely unaffected by this cap when filing at the personal level.

So does this mean Florida taxpayers should ignore these recent PTET changes?

Not quite.

Why Florida Business Owners Still Need to Pay Attention

Many Florida-based S-corporations and partnerships operate in multiple states. If your business has physical presence, employees, or economic nexus in another state, you may be subject to that state’s income tax rules, including PTET elections or their elimination.

Here’s a scenario:

A Florida S-corp provides consulting services to clients in New Jersey. Even though the business is registered in Florida, it may need to file and pay New Jersey state taxes based on income generated there. If New Jersey eliminates its PTET program, that income could become subject to double taxation—once at the entity level and again without the federal deduction relief PTET once offered.

In other words, if your business crosses state lines, these changes could impact you—even from Florida.

What Is the PTET Workaround, Exactly?

The PTET election allows qualifying pass-through entities (like S-corps and partnerships) to pay state income tax at the entity level, rather than passing it to owners on a K-1. This lets the business deduct the full state tax payment at the federal level—effectively bypassing the $10,000 SALT cap.

States created this workaround in response to the federal SALT deduction limit of $10,000 per year, which disproportionately affected small business owners, especially those in high-tax states. But as the 2025 expiration of the SALT cap approaches, some states are scaling back these provisions, assuming federal relief is on the horizon.

What This Means for You as a Florida Taxpayer

If you own a Florida-based pass-through entity, the recent changes to PTET laws across the country may affect you differently depending on how and where your business operates. Here’s how to assess your risk and opportunity:

▶️ Operate Exclusively in Florida:

You’re in the clear—for now. Since Florida does not impose a personal state income tax, it never offered a PTET workaround in the first place. As a result, the elimination of PTET elections in other states doesn’t directly impact your Florida income tax obligations. You still benefit from Florida’s tax-friendly environment with no personal income tax and no PTET filing requirements. However, staying informed is still important, especially if you ever consider expanding into other states.

▶️ Operate in Multiple States:

If your business has nexus (a taxable presence) in other states—such as a remote workforce, physical offices, or sales volume—you may be required to file income tax returns in those states. If you previously relied on PTET in those jurisdictions to deduct state-level taxes at the entity level, the elimination of that election could significantly increase your federal tax burden.

Example: If a state like New York ends its PTET program and you continue earning income there, that portion of your profits may no longer qualify for full federal deduction treatment. This creates the potential for higher total tax liability.

▶️ Plan to Expand Nationally:

If you’re a Florida business owner looking to grow into other states, you need to build multi-state tax planning into your strategy now. As PTET laws change, so does your ability to mitigate the SALT cap. Expanding into a state that still offers PTET may give you a strategic advantage—while entering a state that’s phasing it out could require additional federal tax planning, entity restructuring, or income allocation strategies. Working with a proactive tax advisor early can prevent unpleasant surprises later.

Do You Have Nexus in Another State Without Realizing It?

If you’re a Florida-based business owner, you might assume that Florida’s tax policies are all that matter. But if your company has any economic activity across state lines, you may unknowingly have nexus—a legal obligation to pay taxes in other states.

Here are common triggers for out-of-state nexus:

• Hiring remote employees or contractors based in other states
• Sending sales reps to conduct business across state lines
• Renting or owning storage units, warehouses, or equipment in other states
• Selling to customers online in states with economic nexus thresholds (e.g., $100,000+ in sales)
• Participating in trade shows, conferences, or short-term projects out-of-state

Even without a brick-and-mortar office outside of Florida, your business activities may create nexus—and that means you could be impacted by PTET elections or their elimination in those states.

Tip: Conduct a multi-state nexus review each year with a tax advisor. It can save you from audits, penalties, or lost deduction opportunities.

Top States Florida Businesses Should Watch for PTET Changes

If your business reports income or has operations in other states, keep an eye on these jurisdictions, which are actively reforming or repealing their PTET elections:

• California – Proposed legislation could phase out PTET or cap its benefits due to budget concerns.
• New York – State lawmakers are reviewing the program with an eye toward its sunset after the SALT cap expires.
• New Jersey – Debates are ongoing about limiting PTET access for nonresident business owners.
• Connecticut – Already switched to mandatory entity-level taxation, eliminating the elective PTET option.
• Massachusetts & Illinois – Facing pressure to scale back deductions due to declining revenue and upcoming federal changes.

If you operate in any of these states—or plan to—it’s critical to work with a tax advisor who can help you adapt. These changes could significantly affect your deductions, filing deadlines, and compliance costs.

Strategic Takeaways for Florida S-Corps and Partnerships

1. Track Your Nexus Carefully. Know where your business operates, where you file, and what PTET rules apply in each state.
2. Plan for 2026. The SALT cap is set to expire after the 2025 tax year unless Congress acts. Federal and state responses may change rapidly—stay informed.
3. Re-evaluate Entity Structure. It may be time to reconsider whether an S-corp, partnership, or C-corp is best suited for your growth model—especially if operating across state lines.
4. Get Proactive With Multi-State Tax Planning. As states roll back the PTET workaround, federal deductions could shrink. Smart tax planning now can prevent surprise tax bills later.

Frequently Asked Questions About the PTET Workaround Eliminated

Q1: I own an S-corp in Florida. Does the PTET workaround elimination affect me directly?

A: Not if your business operates exclusively in Florida. Since Florida has no personal income tax and never implemented a PTET election, you won’t see changes in your state-level filings. However, if you do business in other states that are ending PTET programs, your federal tax strategy could be impacted.

Q2: What is the main purpose of the PTET workaround?

A: The PTET workaround allows pass-through entities to pay state income tax at the entity level, letting the business deduct those taxes fully on its federal return. This bypasses the $10,000 SALT deduction cap that applies when individuals report those taxes on their personal returns.

Q3: Which states are eliminating or phasing out PTET elections in 2025?

A: States like Connecticut and California have either capped benefits, imposed limits, or begun discussing phase-outs in anticipation of the federal SALT cap expiring in 2026. The landscape is rapidly changing—consult your tax advisor to evaluate your exposure based on where you file.

Q4: What if I receive income from a state that still offers PTET but later repeals it?

A: You may be eligible to take the PTET deduction for 2024 or 2025 but lose it in future years. This means your 2025 federal tax return could look very different from 2026 onward. Planning now with an accountant ensures smoother transitions.

Q5: Should I consider changing my business structure because of these changes?

A: Possibly. If you’re an S-corp operating in multiple states or foresee expansion, you may benefit from revisiting your entity type, income distribution method, or how you allocate profits across jurisdictions.

Key Milestones: PTET & SALT Deduction Timeline

Understanding the evolution of the PTET workaround and the SALT deduction cap helps clarify why so many states are shifting course in 2025. Here’s a quick look at the key milestones shaping today’s tax decisions:

Bottom line: These tax policies are in flux. What works this year might not work next year. Don’t wait until it’s too late—plan ahead with expert help.

Explore More on SALT Deduction Caps and PTET Changes

If you’re a business owner or tax filer navigating multi-state obligations, these resources can help you stay ahead of upcoming changes and better understand how the elimination of the PTET workaround may impact your federal and state tax strategies:

Tax Foundation – Pass-Through Entity Taxes by State

Get a comprehensive, state-by-state overview of how PTET elections work across the U.S., including which states still offer this deduction workaround, which are eliminating it, and how that affects pass-through entities. The Tax Foundation’s interactive tools and policy briefings are especially useful for CPAs, CFOs, and small business owners with multi-state operations.

IRS – State and Local Taxes (SALT) Deduction Explained

This official IRS guide breaks down what the SALT deduction covers, how the $10,000 cap affects personal tax returns, and why workarounds like PTET were introduced. It’s essential reading for individuals and entities trying to understand the federal implications of their state and local tax filings.

Bloomberg – SALT Cap Workarounds Under Pressure 

Bloomberg offers in-depth coverage of ongoing legislative debates, federal tax reform efforts, and how states are responding to the anticipated expiration of the SALT cap. This article helps you see the broader economic and political context influencing these changes, especially if you’re planning long-term tax strategies or business expansion.

About Freedom Tax Accounting

At Freedom Tax Accounting, we help small business owners in Florida and across the U.S. navigate complex tax laws with confidence and clarity. From multi-state tax filings to entity formation, S-corp elections, and IRS compliance, our team offers the guidance you need to stay compliant—and save more.

Whether you’re expanding your business or restructuring for growth, our CPAs and tax professionals are here to help you make strategic decisions with the latest tax changes in mind.

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