California PTE Elective Tax Calculator 2026 — Form 3804
Calculate California 9.3% pass-through entity elective tax (AB 150) — federal SALT cap bypass, owner credit on Form 3804, net savings for S-Corp and partnership owners.
$
Entity's qualified taxable income for PTE election %
Your pro-rata share of entity income Your federal marginal income tax bracket
Your CA personal income tax bracket
$
Your existing state+local tax deductions (capped at $40K) Both qualify for CA PTE election
Entity income:
$0
Net Federal Tax Savings
$0
PTE Tax Paid (9.3%)
$0
CA Owner Credit
0%
Return on PTE Election
PTE Election Analysis
How the California PTE Election Works
The CA PTE Elective Tax is a sophisticated SALT cap bypass. When the entity pays 9.3% tax on CA income, that payment is a federally deductible business expense. The owner receives a dollar-for-dollar CA credit. The net result is a pure federal tax savings equal to the PTE tax paid multiplied by the owner's federal marginal rate.
Formula
Owner's Qualified Income = Entity Income × Ownership %
PTE Tax = Owner's Qualified Income × 9.3%
Federal Tax Reduction = PTE Tax × Federal Marginal Rate
CA Owner Credit = PTE Tax (100% credit on CA return)
Net Benefit = Federal Tax Reduction − 0 CA cost
(CA credit fully offsets PTE tax paid)
PTE Tax = Owner's Qualified Income × 9.3%
Federal Tax Reduction = PTE Tax × Federal Marginal Rate
CA Owner Credit = PTE Tax (100% credit on CA return)
Net Benefit = Federal Tax Reduction − 0 CA cost
(CA credit fully offsets PTE tax paid)
Example: $500,000 S-Corp, 100% owner, 35% federal rate
Entity income: $500,000 | Ownership: 100%
PTE Tax: $500,000 × 9.3% = $46,500
Federal reduction: $46,500 × 35% = $16,275 federal tax savings
CA credit: $46,500 (fully offsets PTE tax on CA return)
Net benefit: $16,275 with zero additional CA cost
PTE Tax: $500,000 × 9.3% = $46,500
Federal reduction: $46,500 × 35% = $16,275 federal tax savings
CA credit: $46,500 (fully offsets PTE tax on CA return)
Net benefit: $16,275 with zero additional CA cost
Extended
With vs Without PTE Election + Entity Type Comparison
Net benefit analysis and S-Corp vs Partnership PTE eligibility
Side-by-side comparison of owner's federal and CA tax with and without the PTE election.
| Tax Component | Without PTE Election | With PTE Election | Difference |
|---|
Net benefit across different federal marginal rates and entity income levels.
| Federal Rate | $100K Entity | $250K Entity | $500K Entity | $1M Entity |
|---|
Frequently Asked Questions
What is the California PTE Elective Tax?
The California Pass-Through Entity (PTE) Elective Tax, created by AB 150 (2021), allows qualifying pass-through entities (S-corporations, partnerships, LLCs taxed as partnerships) to pay a 9.3% state tax at the entity level. This bypasses the federal $40,000 SALT cap, because the tax is paid by the business (deductible federally) rather than by the individual owner. Owners then receive a credit on their personal CA return equal to their share of the PTE tax paid.
How does the SALT cap bypass work with the CA PTE election?
Under normal rules, individuals can only deduct up to $40,000 of state and local taxes on their federal return (OBBBA 2026 cap). But when a pass-through entity pays the CA PTE tax, that 9.3% tax is deducted at the entity level as a business expense — not subject to the SALT cap. The owner's federal taxable income is reduced by their share of the PTE tax. The owner also gets a CA credit equal to 100% of their PTE tax allocated share, avoiding double taxation.
Who can make the California PTE election?
Eligible entities include S-corporations, partnerships, and LLCs taxed as partnerships or S-corporations. All qualified owners must consent to the election. C-corporations cannot elect PTE tax. The election is annual and irrevocable once made for that tax year. For 2026, the election must be made by March 15, 2026 (for calendar-year entities) and a prepayment of at least $1,000 or 50% of the prior year PTE tax must be made.
What is the net benefit of the CA PTE election for S-Corp owners?
The net benefit depends on the owner's federal marginal rate and whether they were already below the SALT cap. For a single owner with a 35% federal marginal rate and $100,000 CA PTE tax paid: federal tax reduction = $100,000 × 35% = $35,000 reduction in federal tax. CA credit = $100,000 (fully offsetting the PTE tax paid). Net result: $35,000 federal tax savings at no additional CA tax cost. The PTE election creates a pure federal tax benefit.
What is "qualified taxable income" for the CA PTE calculation?
Qualified taxable income is the pro-rata share of the entity's net income allocable to qualified owners who are California residents or nonresidents with CA-source income. It generally includes ordinary business income, separately stated items, and capital gains allocable to CA, minus deductions. Each qualified owner's share is used to compute the 9.3% PTE tax. The PTE tax is then allocated back to owners as a credit on Form 3804.