Oklahoma recently expanded opportunities for taxpayers to increase their State and Local Tax (SALT) deductions—particularly benefiting business owners using pass‑through entities. These updated limits allow eligible Oklahoma businesses to deduct a larger portion of their state income taxes at the entity level, bypassing the federal $10,000 SALT cap for individuals. For those operating in Edmond, Oklahoma City, and across the state, Cannon & Brown CPAs can help structure your business to take advantage of these enhanced deductions.

Background: Why SALT Deductions Matter

The 2017 Tax Cuts and Jobs Act (TCJA) imposed a $10,000 cap on the amount of state and local taxes individuals can deduct on their federal returns. This hit residents in states with higher tax burdens hardest, but even Oklahoma taxpayers felt the impact—especially business owners with complex income structures.

To counter this limitation, states—including Oklahoma—implemented Pass‑Through Entity (PTE) tax elections

The recent update: Oklahoma increased the allowable deduction amount by aligning with federal guidance and expanding eligibility for entity‑level SALT deductions.

What Changed in Oklahoma?

Oklahoma’s improvements to its PTE tax system effectively raise the practical SALT deduction limit for qualifying business owners. Here’s what the updated framework means:

• No individual $10,000 cap at the entity level. The business pays the tax, deducts the full eligible amount, and passes through the net income to the owners.
• Expanded eligibility. More pass‑through entities may elect into the system, creating broader planning opportunities.
• Improved administrative clarity. Recent legislative and procedural updates make the election easier to execute and maintain.

These enhancements help Oklahoma business owners—especially those in Edmond and Oklahoma City—optimize their federal tax liability while maintaining compliance with state rules.

How the SALT Deduction Works for Oklahoma Pass‑Through Entities

When a qualifying business elects to pay the PTE tax at the entity level:

1. The business calculates the Oklahoma state income tax owed based on its taxable income.
2. The business pays this tax directly to the Oklahoma Tax Commission.
3. The business claims the tax payment as a federal business deduction.
4. The owners receive an Oklahoma credit for their share of the tax already paid.

This structure effectively shifts the state tax from being an itemized personal deduction (capped at $10,000) to a fully deductible business expense.

Example: Oklahoma Business Owners Taking Advantage of the New Limits

Example 1: S‑Corporation Owner in Edmond

An Edmond S‑Corp generates $600,000 in taxable income. The owner previously would have been limited to a $10,000 SALT deduction on their federal return.

Under the updated rules, the S‑Corp elects to pay $30,000 in Oklahoma entity‑level tax, deducting the full $30,000 as a business expense. The owner receives a credit on their state return, and their federal taxable income is reduced by the full amount of the entity‑level tax.

Example 2: Partnership in Oklahoma City

A professional partnership in Oklahoma City with three equal partners elects into the PTE system. The entity pays $45,000 in Oklahoma tax, fully deductible at the federal level. Each partner receives a $15,000 credit, preventing double taxation.

Who Benefits Most?

These updated SALT deduction opportunities are especially valuable for:

• Owners of pass‑through businesses(S‑Corps, partnerships, LLCs taxed as partnerships)
• Professionals with large K‑1 income
• Business owners with high personal SALT exposure
• Taxpayers who previously hit the $10,000 SALT cap

Key Action Steps for Oklahoma Business Owners

Cannon & Brown CPAs works with Edmond and Oklahoma City business owners to help them strategically benefit from the updated SALT deduction rules. Here’s how you can get started:

1. Confirm your entity eligibility. Not all structures qualify—your CPA can help evaluate this.
2. Run a federal tax projection. Understand how shifting the deduction to the entity level impacts your overall tax liability.
3. Make (or renew) your PTE election on time. Missing the deadline limits your ability to claim the deduction.
4. Coordinate with your accounting partner. PTE tax interactions affect quarterly payments, estimated taxes, and distributions.

Additional Resources

Explore how Cannon & Brown CPAs helps Oklahoma business owners optimize tax efficiency:

• Tax Advisory
• Accounting Partnership Strategy

Let Cannon & Brown CPAs Guide Your SALT Strategy

The recent increase in Oklahoma’s SALT deduction opportunities creates powerful tax‑planning advantages for business owners who use the rules strategically. Whether you're running a business in Edmond, Oklahoma City, or anywhere in Oklahoma, a thoughtful approach can lead to significant federal tax savings.

Ready to maximize your SALT deduction? Contact Cannon & Brown CPAs for a personalized SALT deduction analysis and tailored tax strategy.