One of the major issues with the Tax Cuts And Jobs Act of 2017 was the limitation on State and Local Taxes(SALT). For the first time in the history of US Income Tax Law, SALT was limited to a $10,000 deduction on Form 1040.
The concept in tax law has always been that a taxpayer shouldn’t pay a tax on a tax. In other words, what we pay in property taxes, and state income or sales taxes, should always be deductible at the federal level.
But with the limitation on SALT, this was no longer true.
This can be a particular problem for Entrepreneurs who own pass-through-entities (PTE’s). Owners of S-Corps and Partnerships, pay the majority of their state income taxes at the personal level. Since state income taxes are limited, this has been problematic for the last few years.
Illinois now has a solution.
For tax years 2021 – 2025, a credit will be available at the entity level that will deduct your state income tax obligation before the pass through to the federal return. In other words, if you have to pay let’s say $1,000 in state income tax, you pay it but also get a credit for that same $1,000 on the K-1 before we get to the SALT limitation.
Since 40% of my practice is out-of-state, let me mention that this is also true for entrepreneurs who own Illinois entities while living out-of-state. All of this will happen at the State level before we get to the federal 1040.
I’m surprised this isn’t getting more press. It will save my clients hundreds of thousands of dollars. It wasn’t even in my continuing professional education for this year.
Because it’s getting so little press, I can only assume that very few tax practitioners even know about it, let alone will put it into practice. This is just one of the ways that having an accountant who studies will consistently and legally save you the most money on your taxes.
Let me leave you with this.
Bloomberg News is reporting that a researcher in Cyprus has discovered yet another C-19 variant which is a combination of Delta and Omicron.
This one’s called Deltacron.
It’s way too early to tell what will happen as a result. Is it stronger? Is it more transmittable? Will existing vaccines provide protection against it? At this point, no one knows.
What we do know is that just when we thought the news couldn’t get any worse, it has.
We all need to take care of ourselves, our families, and our employees. Take whatever measures are necessary now, to do exactly that.
My office will be closed to outsiders as a result. If you need to get something over to us, please use email, the US Postal Service, a facsimile, Fedex, or just slip it through the mail slot.
Anyone who works with us knows that we are the most accessible accountants on the planet. You can call us with no appointment necessary. Zoom is another resource. This will certainly not prohibit the production or quality of our work.
Think about what you need to do in your own businesses and lives to protect your workers and loved ones. Most of all, know that you aren’t going through this alone. We’re right there with you, in the fox hole, shoulder to shoulder.
And I’ll always watch you back.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, PPP Loan Forgiveness, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.