The House’s recently passed $4 trillion tax package includes a significant change to the state and local tax (SALT) deduction cap, raising it to $40,000 from $10,000 for individuals and joint filers making under $500,000.

The increase—which slowly phases downward to $10,000 for higher income levels—is a key win for lawmakers from high-tax states like New York, where the cap has long been a sticking point, according to Tax Foundation.

But for many pass-through businesses, especially those classified as specified service trades or businesses (SSTBs), the relief may be more limited than it looks. 

Since 2020, many SSTBs have relied on state-level pass-through entity tax (PTET) workarounds to bypass the SALT cap. The IRS issued guidance allowing these taxes to be deducted at the entity level, and 36 states, including New York, adopted PTET regime. But the House bill would partially roll that back limiting the ability of SSTBs to benefit from PTETs, particularly those that exceed certain income thresholds. 

At the same time, the bill expands the qualified business income (QBI) deduction under section 199A from 20% to 23%, but keeps existing restrictions on SSTBs in place. 

That creates a split: some pass-throughs will now get both the expanded QBI deduction and continued access to PTETs, while many SSTBs will get neither. The AICPA and others have raised concerns about the equity of this outcome. Tax Foundation explained that narrowing the PTET workaround could reduce GDP and further complicate the tax landscape for firms already facing complex compliance issues. 

According to Bloomberg, the bill is now in the Senate, where further changes could still shift how these provisions play out for New York businesses.