For years, the Kansas SALT Parity Election (also known as the Pass-Through Entity Tax Election, or PTET) was one of the most valuable tax strategies available to S corporations and partnerships. It helped owners bypass the federal $10,000 SALT deduction cap and reclaim deductions they otherwise lost.
But now the landscape has changed. Beginning in 2025, the federal SALT deduction cap increases to $40,000.
This shift dramatically changes who benefits from PTET and why.
If you’re a Kansas business owner, the question is no longer, “Should I use PTET because the cap is too low?” but rather: “Do my taxes still exceed the new $40,000 cap and does PTET still save me money?”
What PTET Does and Why It Still Matters
The Kansas SALT Parity Election changes who pays your Kansas income tax, shifting it from you personally to your business entity. Under IRS Notice 2020-75, entity-level taxes are fully deductible by the business and no SALT cap applies.
Without the election:
- You pay Kansas income tax on your individual return
- That payment counts toward the $40,000 federal SALT deduction cap
- If you exceed the cap, you lose the ability to deduct additional state taxes
With the election:
- Your S corporation or partnership pays the Kansas tax at the entity level
- The business deducts the full amount federally and no $40,000 cap applies
- You receive a credit on your Kansas personal return for the tax already paid
The result:
PTET can still preserve tens of thousands of dollars in federal deductions but only if your total state and local tax payments exceed the new $40,000 limit.
Who Still Benefits Under a $40,000 Cap?
With a much higher cap, fewer Kansas taxpayers automatically benefit. But for many business owners, PTET remains a powerful planning tool.
You may still benefit if:
1. Your Kansas income taxes and property taxes exceed $40,000.
Many profitable S corps and partnerships easily cross this threshold, especially if:
- You have high Kansas business income
- You own significant real estate (personal or business)
- You pay tax in multiple states
2. Your pass-through income is large or varies year to year.
PTET can stabilize your federal deductions even when taxable income swings.
3. You operate in multiple states.
Coordinating PTET elections across states can meaningfully increase total federal deductions.
4. You have multiple owners.
PTET allows the entity to capture deductions consistently regardless of how each owner’s personal tax picture looks.
Who may not benefit?
- Owners whose total state and local taxes stay below $40,000
- Businesses with little or no taxable income
- Owners taking the standard deduction with minimal itemized SALT
- Entities planning structural changes (such as from a partnership to a S corp)
- Small businesses where the administrative cost outweighs savings
Under the new cap, PTET is no longer a no-brainer. It’s a modeling decision.
The Timing Challenge
The Kansas SALT Parity Election must be:
- Made annually
- Filed on your entity’s Kansas return (Form K-120S)
- Irrevocable for that year once submitted
- Supported by timely estimated payments (K-120ES)
- Reported using Form K-9 on individual or fiduciary returns
Missing estimated payments or waiting until your return is due means waiting until next year and potentially missing significant savings.
What You Need to Do Before You Decide
1. Calculate whether you exceed the $40,000 SALT cap.
Add up: Kansas income tax, property taxes, and other state taxes (if multistate). If you cross the cap, PTET remains highly valuable.
2. Coordinate with all owners.
PTET benefits may vary owner by owner. The entity must choose one approach.
3. Plan estimated payments early.
Kansas requires PTET estimates. Missing them causes avoidable issues.
How CGP Group Helps
PTET is still valuable for Kansas business owners but the higher $40,000 SALT cap means the decision is no longer automatic.
We help business owners:
- Model their total SALT exposure
- Determine whether PTET creates meaningful federal savings
- Coordinate estimated payments
- Align entity and owner-level strategies
- Avoid election mistakes that cost real dollars
If you’re unsure whether you should elect PTET, we’ll review your return, model your 2025 and 2026 projections, and make a clear recommendation based on your actual numbers. Contact us to review your situation and capture every dollar of deduction you’re entitled to.
