2026 CRNA tax strategy
PTET is no longer an automatic yes.
The higher SALT deduction changed the comparison. The income phaseout and QBI deduction make sure it is still not simple.
For several years, pass-through entity tax elections were close to a reflex for high-income S corporation owners. Pay the state income tax through the business, deduct it above the line for federal purposes, and sidestep the individual $10,000 state and local tax limit.
Then the federal SALT cap increased. For 2026, the headline limit is $40,400. That makes paying state tax personally more competitive for some CRNAs. It does not make PTET obsolete.
The answer now depends on four numbers: your income, total SALT, itemized deductions, and how much qualified business income deduction you actually receive. This is a tax projection, not a slogan.
The short answer
When does each route tend to win?
PTET tends to look better when:
- Your personal SALT deduction is limited or phased down.
- You would otherwise take the standard deduction.
- Property tax and other state taxes already consume the personal cap.
- Your CRNA business produces little or no usable QBI deduction.
- The state credit and election rules work cleanly for all owners.
Paying personally tends to look better when:
- Your full state tax fits beneath the available SALT cap.
- You already itemize enough deductions to use the additional SALT.
- You receive a full or partial QBI deduction from the business.
- PTET would create state credit, timing, or nonresident complications.
- You are not locked into a multi-year state election.
First, fix the headline number
The 2026 SALT cap is $40,400, until it is not.
For 2026, the federal deduction for state and local taxes is capped at $40,400 for most filing statuses. Married filing separately receives half. The increased cap begins shrinking when modified adjusted gross income exceeds $505,000, or $252,500 for married filing separately.
Why this matters for CRNAs: A household can have less than $40,400 of state and local tax and still be limited. At $600,000 of MAGI, the 2026 cap falls to roughly $11,900. The phrase “our SALT is under $40,400” does not finish the analysis.
The deduction also requires itemizing. If your total Schedule A deductions do not exceed the standard deduction, paying state tax personally may produce little or no incremental federal benefit.
Same state tax, different federal route
What PTET changes
PTET moves eligible state income tax from the owner’s personal return to the pass-through entity. The state generally gives the owner a credit for tax paid by the entity. Federally, the entity deducts the payment when computing pass-through income, subject to the applicable timing and state rules.
The business pays
- The entity claims a federal business deduction.
- Pass-through income and federal adjusted gross income generally decline.
- The payment is not trapped under the owner’s Schedule A SALT cap.
- The same deduction generally reduces QBI.
The owner pays
- The tax may be deductible on Schedule A.
- The deduction is subject to the available SALT cap.
- It helps only to the extent itemized deductions beat the standard deduction.
- It does not reduce the business’s QBI.
The QBI tradeoff
A business deduction can shrink another deduction.
Qualified business income is the net amount of eligible income, gain, deduction, and loss from the business. If the S corporation pays $20,000 of PTET, the payment may reduce QBI by $20,000. If you were otherwise receiving a full 20% QBI deduction, that can reduce the deduction by as much as $4,000.
That does not mean PTET “costs” $4,000. It means you lose a $4,000 deduction. At a 32% marginal federal rate, the estimated federal tax cost would be $1,280.
One important correction: W-2 compensation paid to an S corporation owner is not QBI. If the business pays you a $150,000 reasonable salary and has $200,000 of eligible ordinary business income after expenses, the starting QBI is generally closer to the $200,000 business income, not $350,000.
| 2026 filing status | Full SSTB treatment through | Phaseout range ends |
|---|---|---|
| Married filing jointly | $403,500 | $553,500 |
| Single or head of household | $201,750 | $276,750 |
| Married filing separately | $201,775 | $276,775 |
The thresholds use taxable income before the QBI deduction, not gross revenue or MAGI. The actual calculation can also be limited by taxable income, W-2 wages, qualified property, prior-year QBI losses, retirement contributions, and other business deductions.
Run a first-pass comparison
PTET versus personal SALT calculator
This screening tool estimates the federal difference between paying eligible state income tax through the business and paying it personally. It is designed to show which inputs are driving the answer, not to replace the tax projection.
Enter the household numbers
The personal SALT deduction is usable in this example, while PTET gives up part of the QBI deduction.
This simplified estimate assumes the state PTET credit fully offsets the compared personal state tax. It does not model AMT, the overall itemized-deduction limitation, state addbacks, nonresident credits, ownership allocations, timing differences, prior QBI losses, the taxable-income QBI limit, payroll changes, penalties, or state-specific fees. Use it to identify the likely direction, then confirm the election with a complete federal and state projection.
The actual decision process
Five steps before making the election
Project federal MAGI and the available SALT cap
Calculate the 2026 cap after the income phaseout. Run it once before PTET and again after the expected entity deduction because PTET may lower MAGI.
Compare itemizing with the standard deduction
For 2026, the standard deduction is $32,200 for married filing jointly, $24,150 for head of household, and $16,100 for single or married filing separately. A SALT deduction below the cap still may not change federal tax if the household takes the standard deduction.
Calculate the real QBI effect
Use business income after reasonable compensation and other QBI adjustments. Then apply the SSTB phaseout, taxable-income limit, and any wage, property, or loss limitations that matter.
Review the state election and credit rules
Confirm the election period, deadline, eligible owners, payment timing, owner credit, addback, estimated-payment rules, and nonresident treatment. PTET is a federal workaround built out of fifty different state instruction manuals.
Model every owner, not only the entity
A multi-owner practice can produce different answers for different shareholders. Ownership percentages, residency, filing status, other income, and property taxes can make one election valuable for one owner and less valuable for another.
A cleaner example
Why the same $15,000 tax can produce two answers
Assume a married CRNA household has $450,000 of MAGI before PTET, $15,000 of eligible pass-through state tax, $18,000 of other SALT, $15,000 of other itemized deductions, a 32% federal marginal rate, and a full QBI deduction.
The full $33,000 of SALT fits
The $40,400 cap has not begun phasing down. Total itemized deductions reach $48,000. Compared with the $32,200 standard deduction, the incremental deduction is $15,800, worth roughly $5,056 at 32%.
The business deduction loses some QBI value
The $15,000 entity deduction is worth roughly $4,800 before QBI. A full 20% QBI deduction falls by $3,000, creating an estimated $960 tax cost. The remaining personal itemized deductions add about $256 of value. Estimated total: $4,096.
In this example, paying personally is ahead by about $960. Change MAGI to $600,000 and the personal SALT cap falls sharply. PTET can become the stronger route even after accounting for QBI. One variable moves and the answer flips. That is the entire point of the article.
Michigan CRNA businesses
Michigan calls it the Flow-Through Entity Tax.
Michigan’s FTE tax allows an eligible S corporation or partnership to pay tax at the entity level and gives owners a refundable Michigan credit for their allocated share. For 2026, the state individual rate is 4.25%, and the FTE rate follows the individual rate.
Three-year election
The election generally applies to the initial tax year and the next two years. A choice that looks good this December also needs to survive the next two tax projections.
Election deadline
For calendar-year taxpayers, the election window generally runs through September 30 after the end of the tax year under the rules effective for tax years beginning in 2024 and later.
Return and estimates
The annual FTE return is generally due March 31. Estimated payments are generally due April 15, June 15, September 15, and January 15 when the expected liability exceeds the applicable threshold.
Credit reporting
Beginning with 2025 returns, Michigan members must report required FTE credit information on the applicable owner forms attached to the Michigan individual or fiduciary return.
Michigan rules have changed several times since the FTE tax began. Use the state’s current FTE tax page and deadline calculator rather than relying on an old checklist saved in the firm’s shared drive.
Common mistakes
Where the quick comparison goes wrong
Using $40,400 as a universal cap
The cap phases down with income. A high-earning household may be much closer to the $10,000 floor.
Treating salary as QBI
Reasonable compensation paid by an S corporation is excluded from QBI. Start with eligible business income, not salary plus distributions.
Ignoring itemization
A personal SALT deduction has no incremental value until total itemized deductions exceed the standard deduction.
Assuming a full 20% QBI deduction
CRNA clinical services are generally an SSTB. The deduction may be full, partial, or zero depending on taxable income and other limits.
Comparing only one year
A binding state election can outlive this year’s income, property-tax bill, or filing status.
Waiting until the return is prepared
Election and payment deadlines may arrive before the tax return tells you what would have been better. Projections need to happen during the year.
The practical takeaway
Run both routes before moving the money.
PTET can still be an excellent deduction. The larger SALT cap simply means it is no longer the default winner for every S corporation owner. A proper comparison should show the available SALT cap, itemization benefit, QBI cost, state credit, timing, and multi-year election consequences on the same page.
That is the sort of tax work that belongs in a projection, not in a frantic message two days before an election deadline.
Related planning
More for 1099 and S corporation CRNAs
Frequently asked questions
PTET, SALT, and QBI questions
Is PTET still deductible federally in 2026?
IRS Notice 2020-75 provides that qualifying state income taxes imposed on and paid by a partnership or S corporation may be deducted by the entity when computing its federal taxable income. The federal treatment still depends on the payment meeting the notice and applicable state-law requirements.
Does the $40,400 SALT cap apply to every 2026 taxpayer?
No. Married filing separately receives half of the general amount. For other filing statuses, the $40,400 cap begins shrinking when 2026 MAGI exceeds $505,000 and cannot fall below $10,000. The MFS threshold and floor are also halved.
Does a PTET payment always reduce QBI?
A deductible entity-level state tax payment generally reduces the pass-through business income used in the QBI calculation. Whether that changes the final QBI deduction depends on the taxpayer’s SSTB phaseout, taxable-income limitation, wages, qualified property, losses, and other adjustments.
Is an S corporation owner’s salary included in QBI?
No. Reasonable compensation paid by an S corporation to a shareholder-employee is excluded from QBI. The remaining eligible business income may qualify, subject to the Section 199A rules.
Can PTET help even when total SALT is below $40,400?
Yes. The cap may be phased down because of income, other SALT may already use the available cap, or the household may take the standard deduction. In those cases, an entity-level deduction can still produce federal value.
Can I decide on PTET when preparing the return?
Sometimes the state election window extends beyond year-end, but payment timing still matters for the federal deduction and state credit. Election, estimate, return, and credit-funding deadlines differ by state. The safer habit is to project the decision before the final payment deadline.
Primary sources
- Public Law 119-21 text: 2026 SALT limitation and Section 199A changes
- IRS Revenue Procedure 2025-32: 2026 tax and QBI thresholds
- IRS Notice 2020-75 summary: entity-level state tax deductions
- IRS Instructions for Form 8995-A: QBI, SSTBs, and S corporation compensation
- Michigan Treasury: Flow-Through Entity Tax
- Michigan Treasury: election, estimate, and credit-funding changes
This article and calculator are for educational purposes only and are not individualized tax, legal, accounting, investment, or financial advice. PTET rules vary by state and can change. Confirm the election, payment timing, owner credit, federal deduction, and QBI calculation with professionals familiar with the entity, owners, and states involved.