The pumpkin patch is open, Halloween and Dia de Los Muertos are coming up quickly!

We will focus on a tax planning opportunity created by the higher SALT caps. This time we remind you of the benefit of having a side business, including but not limited to an S-Corp.  This strategy potentially allows you to flow through business deductions to offset income, including W-2 income to maximize your new, higher SALT cap deductions.

If you are a Los Angeles County resident, you have an automatic extension of time to file your personal (Form 1040) and C-Corp. (1120) tax filings until October 15^th, 2025.  These filings are normally due April 15^th.   Whether you are a Los Angeles County resident, or you are not an L.A. resident, but you are on 2024 extension please reach out to us to start the tax filing process!

OBBBA Tax Planning Opportunity

The new tax bill includes one provision which creates an immediate planning opportunity. The increased State and Local Tax limitations (SALT Limitations), from $10,000 in 2024 to $40,000 will benefit many taxpayers, especially those residents of states with high income tax rates, such as CA, NY, HI, VT, ME and/or residents of states with high property tax rates, such as IL, NJ, CT, NE, VT, NH, TX.  This state and local tax component of your itemized deductions calculation will allow more taxpayers to itemize.  The new higher limitations are subject to income limitations outlined below.

If you anticipate tax savings now, you may be able to adjust your federal withholdings from 2025 until the SALT limitations revert to $10,000 in 2030.  This adjustment can add some additional take home pay to your paycheck, instead of waiting for that extra money until you file your taxes.

If you will itemize starting in 2025 based on the new SALT limitations, you will want to keep track of your monetary and in-kind charitable contributions as well as these deductions will factor into the itemized deductions calculation.

Call us for a tax planning conference to review this and other tax saving opportunities.

State and Local Tax (SALT) Cap – Temporarily raised from $10,000 to $40,000 until 2029. In order to be able to take advantage of the new maximum deduction, your Modified Adjusted Gross Income (MAGI) must be $500,000 for Single and Married Filing Joint Filers ($250,000 for Married Filing Separate Filers). If your MAGI is above the threshold, the SALT deduction will begin to phase out by 30% of the amount above the income threshold until the deduction will revert to the $10,000 cap with MAGI of $600,000 for Single and Married Filing Joint Filers ($300,000 for Married Filing Separate Filers). In summary, if your MAGI is above the full phase-out income level, SALT cap will remain the same as 2024 at $10,000 for Single and Married Filing Joint Filers ($5,000 for Married Filing Separate).

Keep track of Charitable Deductions

With the increased State and Local Tax (SALT) cap more taxpayers will itemize in 2025.  Claiming cash (monetary) and non-cash (items) charitable contributions will add to your itemized deduction, directly lowering your taxable income and saving you real tax dollars!S-Corp.

Tax Strategy to Improve SALT Cap Increase Limitations

What if your 2025 MAGI projection is limiting your SALT cap increase? Please refer to SALT cap increase income limitations in this article. How can you plan to reduce your MAGI to qualify for all or part of the SALT cap increase?
One way to lower your MAGI is to report business deductions through a side business, which may capture enough business deductions to offset other income, including you W-2 income. This strategy could lower taxable income and also increase SALT deductions in some cases, significantly increasing the tax benefit. Although this side business can be a sole-proprietorship operating in your name or under a fictitious business name (DBA), forming an S-Corp. may provide additional benefits, including protection of personal assets in the event of litigation and lower self-employment taxes once the business is profitable.

Higher 2025 Standard Deductions

If you cannot itemize, based on the new SALT caps, you will benefit from higher 2025 standard deductions:

• Married filing jointly: $31,500 (up by $2300 from 2024).
• Single or Married Filing Separately: $15,750 (up by $1150 from 2024).
• Head of household: $23,625 (up by $1725 from 2024).
• Additional standard deduction of $2000 for those age 65 or older or blind.

Under OBBBA, a new temporary tax deduction of up to $6,000 per person is available for qualifying seniors aged 65 or older.

This “senior bonus” is in effect for the 2025 through 2028 tax years and applies to individuals who meet certain modified adjusted gross income (MAGI) limits. It is a tax deduction, meaning it reduces your taxable income, and is not a refundable credit.

Eligibility requirements

• Age: You must be 65 or older by the end of the tax year. For married couples filing jointly, each spouse who is 65 or older can claim the deduction.
• Income limits: The deduction is available in full only to taxpayers with a MAGI below a certain threshold and phases out at higher incomes.
  • Single filers: The full $6,000 deduction is available for those with a MAGI of $75,000 or less. It phases out completely at $175,000 MAGI.
  • Married filing jointly: The full $12,000 deduction (if both spouses qualify) is available for couples with a combined MAGI of $150,000 or less. It phases out completely at $250,000 MAGI.
• Filing method: Unlike some deductions, this bonus is available whether you take the standard deduction or itemize

2024 S-Corporation and Partnership Filing Deadline for those on Extension was September 15^th, 2025.

S corporation (Form 1120S) and partnership (Form 1065) tax returns for entities who use the calendar tax year were due March 15^th.   Requesting an extension to file gives you 6 months of extra time to file until the September 15^th deadline. Extensions are no longer available unless you are Los Angeles County residents, who have automatic extensions of time to file until October 15^th.

2024 Individual Tax Returns, Single Member LLCs, C Corporations Filing Deadline for those on Extension is October 15^th, 2025.  

Individual (1040) tax filings and payments were due April 15^th.  Single Member LLCs (Form 568) not owned by a pass-through entity were due April 15^th.  C Corporation (1120) tax returns were due April 15^th.  The extension to file gives you 6 months extra time to file until the October 15^th deadline. Remember that extensions of time to file are not extensions of time to pay.  We can help you to figure out if you will have a liability so you can make an estimated tax payment by the April 15^th deadline to avoid late payment penalties. ONLY Los Angeles County residents have an automatic extension of time to file and pay until October 15^th.

 Los Angeles County Residents – Automatic Extension of Time to File and Pay.

The IRS has granted Los Angeles County residents and businesses an extension to file 2024 individual returns, business returns, and all tax payments until October 15, 2025. Per the IRS website:

“The Oct. 15, 2025, deadline applies to individual income tax returns and payments normally due on April 15, 2025. This relief also applies to the 2024 estimated tax payment normally due on Jan. 15, 2025, and estimated tax payments normally due on April 15, June 16, and Sept. 15, 2025. Penalties on payroll and excise tax deposits due on or after Jan. 7, 2025, and before Jan. 22, 2025, will be abated as long as the tax deposits are made by Jan. 22, 2025.”

We are available this fall to help with tax planning and tax filings.  Please reach out to Emily@taxplus.com in L.A. at 310.398.3231 or to Henna@taxplus.com in S.D. at 858.279.1640 to request a tax planning conference or to start the tax filing process.  We can work with you effectively in person or virtually. Call TaxPlus today to take control of your tax planning and make the most of the new law.