California PTE Elective Tax Calculator
Does the California passthrough entity election beat the SALT cap for your business?
A 2025 tax year estimate of your entity’s California PTE elective tax, the federal deduction it unlocks, each owner’s CA credit under Form 3804-CR, and the net federal + state benefit — per owner and for the entity.
June 15 PTE prepayment deadline is approaching.
Missing the June 15 prepayment eliminates the PTE election for the entire tax year — no exceptions, no late payment, no cure. The prepayment is the greater of 50% of last year’s PTE tax or $1,000, paid on FTB Form 3893 (PTE).
Net entity + owner benefit — 2025
Entity-level PTE tax
| Component | Amount |
|---|
Payment schedule
Per-owner breakdown
| Owner | Share of PTE tax | Fed savings | CA net cost | QBI erosion | Net benefit | Verdict |
|---|
How this was calculated
3-year projected savings (assuming similar income)
Rough projection assuming the same qualified net income, ownership, and consent each year. Actual savings will vary with income, rate changes, and any tax law changes.
How the SALT cap workaround actually works
The problem. The federal $10,000 SALT cap (§164(b)(6)) limits individuals to deducting only $10,000 of state and local taxes on Schedule A. For a CA resident partner with a $50,000 state tax bill on passthrough income, $40,000 of state tax is stranded — no federal deduction.
The workaround. IRS Notice 2020-75 blessed state PTE regimes: state tax paid by a passthrough entity is deductible at the entity level as an ordinary business expense (§164 without the SALT cap), because it’s not a tax on the individual. The entity’s deduction reduces the K-1 income that flows to the owner — producing the same effect as if the owner had deducted the state tax on Schedule A, but without the $10k limit.
California’s answer. AB 150 (2021), extended by SB 113 (2022) and AB 1874, imposes a 9.3% elective tax at the entity level. The entity pays the tax, deducts it federally, and the owner gets a non-refundable CA credit under §17052.10 for their pro-rata share via Form 3804-CR — net-net, the state doesn’t collect twice.
Why the QBI erosion matters. The federal deduction reduces the entity’s ordinary income, which reduces the §199A QBI base. If you’re in QBI Zone 1 (below the threshold), the 20% deduction gets smaller. If you’re in Zone 3 non-SSTB and wage-limited, the erosion is capped by the W-2/UBIA formula. If you’re Zone 3 SSTB (like CPAs), no QBI anyway — the PTE election is pure federal win.
This is an estimate — not tax advice.
Actual PTE election value depends on entity apportionment, owner residency, other-state resident credits, §17061 pass-through income limitation on the CA credit, tentative minimum tax, AMT interaction, QBI phase-in mechanics, and current CA / IRS guidance. A CPA should confirm the numbers before you file Form 3893, take the entity deduction, or claim the credit on Form 3804-CR.
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2025 CA PTE elective tax at a glance
| Rate | 9.3% flat |
| Applied to | Consenting partners’ pro-rata share of qualified net income (CA apportioned) |
| Statute | Cal. R&TC §17052.10 (credit); §§19900–19902 (entity election, rate, payment) |
| Entity voucher | FTB Form 3893 (PTE) — both prepayment and balance |
| Owner credit form | FTB Form 3804-CR — owner’s claim of PTE credit |
| Entity election form | FTB Form 3804 — election attached to Form 100S / 565 / 568 |
| Prepayment #1 due | June 15, 2025 — greater of 50% of prior-year PTE tax or $1,000 |
| Balance due | March 15, 2026 (calendar-year passthroughs) — original return due date, no extension |
| Owner credit rules | Non-refundable, 5-year carryforward, limited by §17061 to CA tax on pass-through income |
| Missing prepayment | Election eliminated for entire year |
Ready to elect?
Get the 2025 PTE election checklist and Form 3893 filing calendar by email.
We’ll send you a one-page PDF that covers the June 15 prepayment mechanics, the Form 3893 / 3804 / 3804-CR filing sequence, the owner-consent letter template, and the CA-vs-federal deadline calendar side-by-side. Email only — no phone, no firm size, nothing else.
© Laléa & Black, LLP. 2025 California PTE elective tax rules per Cal. R&TC §17052.10 and §§19900–19902 (AB 150, SB 113, AB 1874). This tool is directional and does not model apportionment, other-state credits (OSTC), CA tentative minimum tax, AMT recapture, §17061 credit limitations, or federal §199A phase-in mechanics beyond a single-tier erosion estimate. This tool does not create a client relationship, is provided “as-is” without warranty, and does not constitute tax, legal, or accounting advice.