Ask The Hammer: How Can Business Owners Sidestep the $10,000 Cap on State and Local Tax Deductions?
Jeffrey Levine of Buckingham Wealth Partners explains how business owners can sidestep the $10,000 cap on state and local tax deductions.
Key Takeaways
- Have your business pay state income taxes directly instead of paying them personally—businesses can deduct unlimited state taxes while individuals are capped at $10,000, with the deduction flowing through to your personal return
- Verify if your state offers this workaround before implementing it—approximately 19-20 states have enacted these mechanisms, but rules vary significantly by state
- This strategy works primarily for state income taxes, not property taxes, so use your remaining $10,000 personal SALT deduction for real estate taxes which typically cover most people's state-level obligations
- Consult with your CPA, financial advisor, or tax attorney to determine eligibility and implementation steps for your specific situation—this is considered 'close to free money' if available to you
- Monitor for potential federal relief changes—the Build Back Better Act did not pass, but more states may enact these workarounds in 2022 if no federal SALT cap relief becomes available
How Can Business Owners Sidestep the $10,000 Cap on State and Local Tax Deductions? Jeffrey Levine of Buckingham Wealth Partners explains how business owners can sidestep the $10,000 cap on state and local tax deductions. Watch more episodes of Ask The Hammer at this link: https://www.finstream.tv/videos/ask-the-hammer/
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