Final Tax Reform Bill Preserves SALT And PTET Deductions For Traders And Professionals
Final Tax Reform Bill Preserves SALT and PTET Deductions for Traders and Professionals
After weeks of deliberation, revisions, and intense advocacy, the Senate and House have passed the final version of the One Big Beautiful Bill Act (OBBBA, H.R. 1), sending it to President Trump for signature on Independence Day. The final legislation maintains critical tax benefits for traders and other professionals by preserving access to state and local tax (SALT) deductions and the pass-through entity tax (PTET) workaround.
The original Tax Cuts and Jobs Act (TCJA) capped the SALT itemized deduction at $10,000 per year, causing tax increases for many professionals in high-tax states. In response, 37 states adopted PTET regimes allowing pass-through businesses—like LLCs, partnerships, and S-Corps—to deduct SALT at the entity level and bypass the cap. This workaround became vital for service businesses and traders who qualified for trader tax status (TTS).
The House version of H.R. 1 proposed increasing the SALT cap to $40,000 in 2025 with phaseouts based on income, but controversially denied PTET deductions to specified service trades or businesses (SSTBs)—including accountants, lawyers, doctors, and traders. The original Senate draft mirrored some of these restrictions, proposing a 50% cap on the PTET deduction.
Thanks to strong feedback from CPAs, industry leaders, and affected taxpayers—including traders—Senate Republicans revised their position. On July 1, the Senate passed a new version of the bill that:
This revised Senate bill retained the SALT workaround while avoiding discrimination against SSTBs, and it passed the Senate on July 1.
On July 3, the House approved the Senate's version without any amendments, ensuring that the bill would proceed directly to the President's desk in time for the July 4 deadline. This legislative alignment locked in the Senate's more favorable approach to SALT and PTET deductions.
The final legislation avoids the unfair treatment proposed in earlier versions and maintains parity between pass-throughs and C corporations. Traders with TTS who operate via PTET-eligible entities can continue to deduct state taxes at the entity level, significantly lowering their federal tax liabilities.
The AICPA welcomed this outcome, with President and CEO Mark Koziel emphasizing that removing PTET limits was vital for fairness and simplicity in the tax code. The final result ensures continuity for millions of small businesses and traders.
This legislative victory was hard-won and shows the power of informed advocacy. By preserving the SALT cap workaround and maintaining access to PTET deductions for all professions, the final tax reform bill supports a fairer and more competitive environment for traders and service businesses.
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