Recent Pass-Through Tax Law Updates for Tax Strategists

Think the new $40,000 SALT cap solved your tax problem? Think again. For high-income business owners, the real solution is still the Pass-Through Entity Tax (PTET). Here’s why PTET remains the smarter play even with the higher cap: 1)The $40K SALT cap phases out fast: If your income exceeds $500K (joint), the cap quickly shrinks, often back to the $10K minimum. For high earners, the benefit is minimal or nonexistent. 2) PTET stays fully deductible: The OBBBA did not touch PTET. State income tax paid at the entity level is still fully deductible on the federal return, and that benefit flows to owners regardless of itemizing. 3)Works even if you don’t itemize: Since PTET is deducted before income passes through, you get the federal benefit no matter what. 4)Predictability matters: The $40K cap is temporary (2025 to 2029). PTET remains steady and reliable for long-term planning. 5)State rules differ: PTET elections vary, so you must coordinate with your CPA and review annually. For most high-earning pass-through owners, PTET still delivers far more reliable savings than the new SALT cap ever will. 📌 Bottom line: The SALT expansion helps some, but for high earners with large state tax bills, PTET continues to be the stronger strategy.

Are Family Offices Prepared to Adjust Before the Tax Rules Change Again? The latest tax proposal from the House includes several important changes. These updates favor direct real estate ownership and long-term planning for Family Offices! Some of the benefits include: ➤ Return of 100 Percent Bonus Depreciation Tax Code Reference: IRC Section 168(k) What Changed: The proposal brings back full bonus depreciation for qualifying real estate and equipment. This applies from 2025 through 2029. What It Means: You can fully deduct the cost of new improvements or property purchases in the year they are placed in service. This can significantly reduce taxable income. What Family Offices Should Do: • Focus on industrial, multifamily, and medical office properties, which are already preferred for stability. • Plan capital improvements or acquisitions now to be ready by the 2025 start date. • Work with tax and legal advisors to ensure the timing and structure meet eligibility requirements. ➤ Section 199A Deduction Increase from 20 Percent to 23 Percent Tax Code Reference: IRC Section 199A What Changed: The deduction for Qualified Business Income (QBI) from pass-through entities may increase to 23 percent. What It Means: More income from LLCs, partnerships, and S corporations will be shielded from tax. Family Offices Should: • Review all operating entities to confirm QBI eligibility. • Adjust ownership models if needed to increase tax efficiency. • Update tax projections for each major holding. ➤ Possible Expansion of Opportunity Zones Tax Code Reference: IRC Sections 1400Z-1 & 1400Z-2 What Changed: The bill suggests the creation of new Opportunity Zones. What It Means: Family Offices may have a second chance to invest gains in tax-advantaged projects. Holding qualified OZ assets for 10 years may lead to tax-free growth. Family Offices Should: • Track new zone OZ designations. • Consider how new investments can align with estate and legacy planning. • Reassess earlier OZ investments that may not have met timing or structure goals. ➤ The Larger Message What Changed: The policy direction supports long-term real asset investment, cash flow, and stability. What It Means: This is not just technical tax reform. It is a signal that well-structured real estate plays will continue to be a core tool for wealth preservation. Family Offices Should: • Revisit entity structures and estate planning strategies. • Align legal, investment, and tax teams to ensure the portfolio is optimized. • Avoid the trap of waiting. The advantage lies in acting before changes are fully implemented. What does it all mean? This is the moment for Family Offices and other real estate investors to revisit their portfolios, assess their structure, and make decisions that can protect and grow wealth for the next decade. This is how I see the opportunity. Are there other benefits you’re seeing? Smart tax strategy is proactive. And right now, the window is open.

The new tax bill that just passed into law is the single most significant piece of legislation we have had in 8+ years Here is everything you should know as a high-income professional or business owner: (Bookmark this post as I'll be updating it as this develops) Background: I have run a startup for the last 3 years that helps business owners and high-income professionals be smart about taxes So this is an area I know a thing or two about This is also not a political post, and none of this is an endorsement for any specific policy 1 - America's biggest tax break for startup founders & investors gets even more generous QSBS allows C-Corp shareholders to pay no taxes on exit This bill raises the limit to $15M, has partial benefits kick in after 3 years & allows a company to qualify up to $75M in assets 2 - 100% bonus depreciation is back When you purchase property with a useful timeline of <20 years, you can depreciate the entire amount upfront This is very significant for real estate investors, who can recoup a huge percentage of their purchase price as a usable tax loss 3 - Relief for software companies in America There was a wild piece of legislation that forced you to amortize software developer salaries over 5 years This resulted in software companies that could lose money and still face a tax bill since their developer salaries had to be deducted over 5 years This is now fixed for local talent 4 - Qualified business income deduction permanent for LLC and S-Corp owners in America Pass-through business owners were gifted a free deduction of up to 20% called QBI since 2017 This was supposed to end this year.. but with this bill, it's now been made permanent 5 - Estate and gift tax exclusion made permanent at $15M per taxpayer, or $30M per couple These exclusions were supposed to fall by more than half at the end of this year But the new bill increases the exemption to $30M for a couple, which is big estate planning news 6 - State & local tax deduction now capped at $40K Before 2017, you could fully deduct state & local taxes from your federal return if you itemized But in 2017, the deduction was capped at $10K The new bill raises it to $40K... this will lead to more people itemizing taxes! 7 - Opportunity zone program made permanent You can defer capital gains for 5 years on a rolling basis by investing in an opportunity zone Hold the property for 10 years and you receive a free step-up in basis Will be a new stricter threshold on what areas count as an OZ 8 - The lowered 21% corporate tax rate is made permanent This coupled with QSBS expansion makes C-Corps a very attractive choice despite the double taxation At the highest tax brackets, C-Corps get very close to S-Corp tax rates with QSBS being a massive benefit on sale If you want to read the rest, I'll be covering these changes in a detailed breakdown post on my personal finance newsletter Silly Money Join 40k+ others: sillymoney.com/subscribe

🏛️ The House just passed legislation that could add $50K+ to your SMB's bottom line. While most coverage focuses on the politics, I'm tracking the dollars—and the math is compelling. 📊 THE NUMBERS: Last Friday's vote (June 7th) doubled the Section 179 expensing limit to $2.5M and enhanced the pass-through deduction to 23%. Here's what the headlines miss: 🚛 Landscaping Business Example: 8 trucks + 6 trailers + equipment = $1.67M total Tax savings: $417,500 in Year 1 vs. traditional depreciation Additional $3,000 annually from enhanced pass-through deduction 💡 The Disconnect: ✅ Tax advantages: IMPROVING ❌ Capital access: TIGHTENING Banks are pulling back despite Fed rate cuts. SBA guidelines are stricter than ever. 🎯 The Opportunity: The advantage belongs to SMBs that master the trifecta: → Tax intelligence → Capital discipline → Cash-flow optimization 📈 What I've Discovered: The $2.5 trillion non-bank lending market is exploding while traditional lenders retreat. Smart operators are using: -COLI as collateral for working capital -Enhanced Section 179 for equipment expansion -Strategic entity restructuring for maximum pass-through benefits ⏰ Critical Timeline: August 15th: Quarterly tax deadline (your planning checkpoint) September: Senate returns to vote December 2025: Current provisions could sunset 🔍 Full breakdown below includes: ✓ Why non-bank lending matters now ✓ Three moves before August 15th ✓ How COLI works as collateral 📄 Full analysis in the article below ⬇️ #SmallBusiness #TaxStrategy #CapitalAllocation #AmericanOpportunityAct #SMBFinance

We discussed a 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲 called Pass-Through Entity Taxes (PTET). This allows partnerships (1065) and S-corporations (1120S) to 𝐟𝐮𝐥𝐥𝐲 𝐝𝐞𝐝𝐮𝐜𝐭 state and local taxes (SALT), 𝐛𝐲𝐩𝐚𝐬𝐬𝐢𝐧𝐠 the $10,000 cap on Schedule A itemized deductions. Let's break it down with a practical example. Many people were confused and asked common questions that they are 𝐝𝐞𝐝𝐮𝐜𝐭𝐢𝐧𝐠 state and local taxes (SALT) on federal entity return as business expense already. Whereas I mentioned that SALT 𝐜𝐚𝐧'𝐭 𝐛𝐞 𝐝𝐞𝐝𝐮𝐜𝐭𝐞𝐝 on Forms 1065 or 1120S. Instead, they must be listed on Schedule A, which has a $10,000 capping. However, if they pay SALT at the business level as PTET, then only those can be deducted as a business expense. Let's clear this up. What are Pass-Through Entities? The entity which passes its income/loss to individual 1040 and pays taxes at individual level and 𝐧𝐨𝐭 at business level. Let's say a couple has an S-corporation (1120S) in 𝐈𝐥𝐥𝐢𝐧𝐨𝐢𝐬, and they are Illinois residents. The taxpayer works full-time for this S-corp and earns a net profit of $550,000, while the spouse earns $100,000 from a W-2 job. The $550,000 from the S-corp is passed through the K-1 form to their 1040, and they pay taxes on this income along with the spouse's W-2 income. The taxpayer files both a federal 1040 and an 𝐈𝐥𝐥𝐢𝐧𝐨𝐢𝐬 𝐈𝐋-𝟏𝟎𝟒𝟎 state tax return. Illinois taxes individuals at a 𝟒.𝟗𝟓% rate, so the taxpayer pays $27,225 ($550,000 * 4.95%) on the S-corp income to the 𝐬𝐭𝐚𝐭𝐞. This is considered as, "state income taxes paid by shareholders on their 𝐩𝐞𝐫𝐬𝐨𝐧𝐚𝐥 𝐫𝐞𝐭𝐮𝐫𝐧𝐬," which can 𝐨𝐧𝐥𝐲 be deducted on Schedule A as an itemized deduction, and up to the $10,000 cap. Here's where the confusion comes in: the law says that “a corporation or partnership can deduct state and local income taxes 𝐢𝐦𝐩𝐨𝐬𝐞𝐝 on the corporation or partnership as business expenses.” What does this mean? Simply put, if a corporation or partnership owns property in a state and pays property taxes on it, these taxes are considered to be imposed on the business. Therefore, they can be deducted as a business expense from their profit and loss on the federal tax return. To sum it all up: "SALT imposed on 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥𝐬 must be listed on 𝐒𝐜𝐡𝐞𝐝𝐮𝐥𝐞 𝐀, with a $10,000 limit. Any taxes directly imposed on a 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 can be deducted as a 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐞𝐱𝐩𝐞𝐧𝐬𝐞 with no capping for federal tax purposes." Some states have found a way around the $10,000 cap. Instead of passing the income to the individual, who would then pay taxes with the $10,000 deduction cap, they allow the taxpayer to pay taxes at the entity level which would be considered imposing tax on business entity. In our example, this would mean paying $27,225 at the entity level, which is fully deductible as a business expense, thus bypassing the $10,000 cap. #cpa #uscpa #learning #taxstrategy #cpafirm #irs #ustax #ustaxation #taxsavings

📊 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗰 𝗧𝗮𝘅 𝗣𝗹𝗮𝗻𝗻𝗶𝗻𝗴 𝗨𝗻𝗱𝗲𝗿 𝘁𝗵𝗲 𝗢𝗕𝗕𝗕 𝗔𝗰𝘁 – 𝗔𝗿𝗲 𝗬𝗼𝘂 𝗥𝗲𝗮𝗱𝘆? 📝 With the 𝐎𝐧𝐞 𝐁𝐢𝐠 𝐁𝐞𝐚𝐮𝐭𝐢𝐟𝐮𝐥 𝐁𝐢𝐥𝐥 (𝐎𝐁𝐁𝐁) officially passed, the clock is ticking on some of the most valuable planning opportunities we’ve seen in years. ✅ Here are 𝟓 𝐡𝐢𝐠𝐡-𝐢𝐦𝐩𝐚𝐜𝐭 𝐦𝐨𝐯𝐞𝐬 business owners and CFOs should be evaluating 𝐫𝐢𝐠𝐡𝐭 𝐧𝐨𝐰: 1️⃣ 𝐌𝐚𝐱𝐢𝐦𝐢𝐳𝐞 𝐒𝐀𝐋𝐓/𝐏𝐓𝐄𝐓 𝐁𝐞𝐧𝐞𝐟𝐢𝐭𝐬 𝐁𝐞𝐟𝐨𝐫𝐞 𝟐𝟎𝟑𝟎 👉 Take full advantage of the temporary $40K SALT cap by electing 𝐏𝐓𝐄𝐓 (𝐏𝐚𝐬𝐬-𝐓𝐡𝐫𝐨𝐮𝐠𝐡 𝐄𝐧𝐭𝐢𝐭𝐲 𝐓𝐚𝐱) in qualifying states. This is a golden window for tax efficiency. 2️⃣ 𝐂𝐚𝐩𝐢𝐭𝐚𝐥𝐢𝐳𝐞 𝐨𝐧 𝐁𝐨𝐧𝐮𝐬 𝐃𝐞𝐩𝐫𝐞𝐜𝐢𝐚𝐭𝐢𝐨𝐧 & 𝐒𝐞𝐜𝐭𝐢𝐨𝐧 𝟏𝟕𝟗 👉 Accelerate asset purchases and improvements to benefit from 𝟏𝟎𝟎% 𝐛𝐨𝐧𝐮𝐬 𝐝𝐞𝐩𝐫𝐞𝐜𝐢𝐚𝐭𝐢𝐨𝐧 and a raised $𝟐.𝟓𝐌 𝐒𝐞𝐜𝐭𝐢𝐨𝐧 𝟏𝟕𝟗 𝐜𝐚𝐩. Review 5-year capital investment plans now. 3️⃣ 𝐃𝐨𝐦𝐞𝐬𝐭𝐢𝐜 𝐑&𝐃 𝐑𝐞𝐚𝐥𝐢𝐠𝐧𝐦𝐞𝐧𝐭 👉 R&D expenses are once again 𝐟𝐮𝐥𝐥𝐲 𝐝𝐞𝐝𝐮𝐜𝐭𝐢𝐛𝐥𝐞 (𝐢𝐟 𝐝𝐨𝐦𝐞𝐬𝐭𝐢𝐜). Shift or prioritize spending within the U.S. to maximize the benefit. 4️⃣ 𝐀𝐝𝐣𝐮𝐬𝐭 𝐖𝐨𝐫𝐤𝐟𝐨𝐫𝐜𝐞 𝐂𝐨𝐦𝐩𝐞𝐧𝐬𝐚𝐭𝐢𝐨𝐧 𝐌𝐨𝐝𝐞𝐥𝐬 👉 With 𝐭𝐢𝐩𝐬 (𝐮𝐩 𝐭𝐨 $𝟐𝟓𝐊) and 𝐨𝐯𝐞𝐫𝐭𝐢𝐦𝐞 (𝐮𝐩 𝐭𝐨 $𝟏𝟐.𝟓𝐊) now tax-free, there’s room for hybrid pay structures—especially in 𝐫𝐞𝐭𝐚𝐢𝐥, 𝐡𝐨𝐬𝐩𝐢𝐭𝐚𝐥𝐢𝐭𝐲, 𝐥𝐨𝐠𝐢𝐬𝐭𝐢𝐜𝐬, and more. 5️⃣ 𝐑𝐞𝐬𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞 𝐕𝐞𝐡𝐢𝐜𝐥𝐞 𝐅𝐥𝐞𝐞𝐭𝐬 & 𝐋𝐨𝐚𝐧𝐬 👉 Interest on 𝐔.𝐒.-𝐦𝐚𝐝𝐞 𝐯𝐞𝐡𝐢𝐜𝐥𝐞 𝐥𝐨𝐚𝐧𝐬 is now deductible. Explore smart structuring of your fleet financing for added tax leverage. 📌 𝐀𝐝𝐝𝐢𝐭𝐢𝐨𝐧𝐚𝐥 𝐏𝐥𝐚𝐧𝐧𝐢𝐧𝐠 𝐏𝐫𝐢𝐨𝐫𝐢𝐭𝐢𝐞𝐬: 🔸 Move fast on bonus depreciation 🔸 Optimize comp structures for tax savings 🔸 Time big investments wisely 🔸 Start prepping for 2030 when the SALT cap reverts to $10K 💡 Now is the time to review 𝐞𝐧𝐭𝐢𝐭𝐲 𝐬𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞𝐬, 𝐜𝐚𝐩𝐢𝐭𝐚𝐥 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲, 𝐚𝐧𝐝 𝐞𝐯𝐞𝐧 𝐞𝐱𝐩𝐥𝐨𝐫𝐞 𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐲 𝐙𝐨𝐧𝐞 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬 as part of a forward-looking tax playbook. 📬 Want to discuss how these changes affect your 2025+ road map? Let's connect. #OBBB #TaxPlanning #CPAInsights #BonusDepreciation #PTET #SALT #StrategicFinance #Section179 #R&D #OpportunityZones #TaxUpdate #BusinessGrowth #CFOInsights #StartupStrategy