Tax Reduction Podcast
Introducing your host, Boris Musheyev, CPA. In this podcast Boris debunks the tax code by teaching you simple and effective tax strategies, so you can keep the most of what you make. His mission is to help you cut taxes and build wealth using the power of proactive tax strategies. Every episode you will gain a better understanding of how the tax code is designed to be in favor of money-making entrepreneurs like yourself.
🆓 Download FREE PDF: 7 Write-Offs Every S-Corporation Business Owner MUST Know: https://bit.ly/podcast7writeoffs
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Tax Reduction Podcast
Episode 29. Pass-Through Entity Taxation Strategy
Discover how the 2025 Pass-Through Entity Tax (PTET) strategy can help business owners maximize tax savings and reduce their tax liabilities. In this podcast, we’ll break down how PTET works, why it’s a powerful tax planning tool, and how it benefits S-Corporation owners and other pass-through entities. Learn how to leverage state-level tax deductions and create effective strategies for your business to save thousands on taxes. Whether you’re focused on deductions, write-offs, or advanced tax planning, this approach is a game-changer for entrepreneurs and small business owners alike. Don’t miss these actionable tax strategies that can make a real difference in your bottom line. Stay ahead in 2025 and take control of your taxes today!
I've put together this FREE resource for you:
7 Write-Offs Every S-Corporation Business Owner MUST Know
🆓 Download FREE PDF here: https://7taxwriteoffs.com/
Ready to start saving money on your taxes?
☎️ Schedule your FREE Tax Advisory Session: https://taxplanningcall.com/
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P.S. When you sign up for Gusto, you get a $100 Visa gift card
*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, ...
PTET tax strategy continues to be one of the best tax strategy for business owners going into 2025 and, as a matter of fact, it's going to get even better. If you haven't utilized a pass-through entity taxation PTET in your business, stay tuned, because I'm going to show you what is this tax strategy that can generate significant tax deductions for you and your business, and what can you do today, starting today, to implement it and start generating business tax deductions in your business using PTET tax strategy. Ready, let's go.
Speaker 2:Welcome to the Tax Reduction Podcast for money-making entrepreneurs with Boris Mushaev. Boris has helped entrepreneurs across the United States collectively save millions of dollars in taxes with the power of tax planning and advisory. The only way you, the business owner, can save money on taxes is by using proactive tax strategies, and this podcast is all about saving you money on taxes. Boris will share with you in-depth and easy-to-understand tax reduction strategies that you can implement in your business within 30 days or less. Let's jump into today's episode.
Speaker 1:All right, awesome, let's get started. Let's get into what is a PTET. I'm going to talk through an example over here, exactly what you need to do as a business owner to get this deduction. But we first need an introduction of what is a PTET.
Speaker 1:In 2017, there was a Tax Cuts and Jobs Act a new tax law passed by President Trump. What that tax law did is it limited? How much you can itemize your state taxes on your personal income taxes $10,000 salt cap deduction by now. You probably know about this right? Basically and I just want to give you a little bit of introduction there was a ten thousand dollar limit that they can they put how much you can itemize. I'll give you a quick example.
Speaker 1:Let's say you live in a state like california. I'm using california because it's a high income state tax rate, but also helps us with an example. Your property taxes for this example is $15,000. So before TIGJA, you were able to deduct $15,000 when you're itemizing your tax return. Okay, additionally, if you paid state income taxes to California for earning income in that state $30,000 in my example, altogether it's $45,000, right? Property taxes $15,000. State income taxes $30,000. Before TICCHA, before passing of this law, you could deduct excuse me, entire $45,000 on your personal income taxes.
Speaker 1:After TICCHA was passed, they put a SALT cap. Salt stands for state and local taxes. They said you know what? Whatever you pay your state in taxes, it's no longer deductible. You can only take $10,000. Huge slap to a lot of taxpayers. Okay, although TIGJA had a lot of great provisions on the tax law and so forth, but this one was my least favorite until until until. Okay. So let's just take a step back. Now you can only deduct $10,000, okay. Before I continue, what the states did in your favor right now, president Trump was reelected again and, as a matter of fact, today in the morning I ran in Bloomberg Businessweek he's meeting with some Republicans and they're thinking to increasing the SALT cap to $20,000, which is actually even better news for us. I will explain to you how.
Speaker 1:Now let's take a step back. We said you can only deduct $10,000. So what happened? States were not happy about it. They're like what do you mean? The residents of our states are paying us income taxes. They were able to deduct these income taxes and now they can't. So they came up with what's called PTET I should have wrote it here but Pass-Through Entity Taxation it's a completely voluntary tax. Okay, the states said listen, why don't you pay us a business tax instead of state income taxes? For example, you can convert your state income taxes into a business tax instead of state income taxes. For example, you can convert your state income taxes into a business tax and get that as a business tax deduction. More details on this right after this break.
Speaker 2:If you have a tax preparer and you do not have a tax advisor, the only way you can save money on taxes is by using proactive tax planning strategies that only a tax advisor can give you. Bora's put together a free PDF for you, the business owner Seven tax write-offs every S-corporation business owner must know. In this PDF you can find seven tax strategies that you can start using in your business to instantly start saving money on taxes. Click on the link in the description below for a free download.
Speaker 1:All right. So now that we're back, let's talk about states, right? So the states came up, majority of the states, most of the states I believe at this point it's more than 30 states that came out and said you know what? We don't like this. We don't like the $10,000 limit, so we're going to create for business owners what's called a pass-through entity taxation. It's a completely voluntary tax. So, coming back to our example, we have $30,000 in state income taxes that is no longer deductible. So states like California they said you know what? Why don't we convert the $30,000 state income tax that you paid to us on personal income taxes? We're going to convert it as a business tax and it's going to be PTET tax. So you're going to pay as a business instead of you paying it personally. You as a business will pay $30,000, okay, we're basically converting it and creating a business tax deduction, which means it is no longer an itemized tax deduction, which means it is now a business tax deduction. And now you get a $30,000 deduction. All you did is basically converted your state income tax of $30,000 into a business tax of $30,000, okay, and that is called P-T-E-T pass-through entity taxation. Now California says you're going to have two taxes to pay. You're going to have to pay $30,000 on state income tax and $30,000 on state business tax, but on your personal income tax return we're going to give you a credit. We're going to wipe that out so you no longer have that tax. Now you're left with a business tax and that business tax becomes tax deduction.
Speaker 1:I don't know why a lot of tax advisors still don't use this tax strategy for their clients. A lot of business owners have no idea about this tax strategy. As a matter of fact, if you are a single member LLC, most states don't even allow you to take a PTET tax deduction or pay PTET tax. We just spoke to a client who enrolled with us for tax advisory services almost $500,000 in net profit in his business single member LLC paying ridiculous amount of tax and self-employment and he does not utilize PTET because he can't. He's a single member LLC. We're converting him to an S corporation. Now not only is he only saving money on the self-employment tax, but he's also not qualifying to pay PTET tax, which creates a huge tax deduction for him and his business. He was blown away and if you're not using PTET tax strategy with your accountant, you're completely missing out on huge tax strategy.
Speaker 1:This is not something for which you have to pay extra. You don't have to invest into anything like a retirement account. You don't have to take the money out of the business to create certain deductions. You're just converting the tax that you are already paying from a personal to a business and you get a deduction.
Speaker 1:Now your next question, boris how do I do this? How do I sign up for PTT? What are the requirements? How can you start converting your personal income tax to a voluntary tax? You have to make an election. I'll give you an example.
Speaker 1:For example, states like New York and New Jersey. You need to voluntarily apply for it before March 15th, if I'm not mistaken. Michigan, you have to apply for it before June 15th. With the state of California, you don't have to apply for it, but you have to make your quarterly estimated payment before June 15th. The point I'm trying to make this tax has a deadline, so you can speak to your tax advisor. I hope you have a tax advisor. Please tell me you have a tax advisor, so you can speak to your tax advisor and be like hey, are we doing this? If we're not, can we apply for it? I want to make sure I'm getting this Okay.
Speaker 1:Number one apply for it. Number two pay your quarterly tax, ptet taxes. I tell all of my clients I'm like look every quarter, my team is going to work with you to calculate your estimated quarterly tax payments. If, for whatever reason, you don't want to pay quarterly estimated tax payments, you don't believe in it. You make more money in the money market account on those tax payments you paid at the end of the year. All is great, I'm okay with it.
Speaker 1:The only thing I want you to do, if you see the word PTET, pay it, because generally you don't get a tax deduction for paying taxes, but you get a tax deduction for paying PTET taxes. So, either paid quarterly or at least paid before December 31st. Calculate what you pay, estimate it and pay it so you can get a deduction before your end. A lot of business owners want to maximize their deductions before your end. They call up their vendors and they say can I prepay you for this? They start prepaying for their rent and all that stuff.
Speaker 1:Hello, you've got a PTET that you can pay before December 31st and get a huge tax deduction and get a huge tax break and save money on taxes. Now what happens is that if you're paying your PTET taxes quarterly, guess what? You don't have to pay quarterly state personal income taxes for that amount. Why your tax advisor? Amazing, amazing strategy for 2025. And it's even more amazing if they're going to increase the limit to $20,000. Because not only are you going to get the $20,000, if your tax liability is more than $45,000, for example, if we redo this example a little bit and you're really paying more than $45,000 in state taxes overall property and state income taxes, you got this $20,000, plus you got the PTET. Honestly, it's like one of those missed tax strategies by a lot of people. Definitely speak to your tax advisor. See you next time.
Speaker 2:That's it for today's episode. Be sure to check out the description below for some free tax reduction resources that Boris put together for you. If you're ready to work with a tax advisor on your tax planning, be sure to schedule your call by heading over to wwwtaxplanningcallcom. That's wwwtaxplanningcallcom. And be sure to subscribe to our podcast to be notified when the next strategy is released.