Corporate Tax Planning

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

Understanding the Pass-Through Entity Tax (PTET) ●Why PTET exists? The 2017 Tax Cuts and Jobs Act (TCJA) limited the federal deduction for state and local taxes (SALT) on individual tax returns to $10,000. This cap affects business owners with pass-through income in high-tax states, as they can’t deduct the full amount of state taxes on their federal return. PTET helps to bypass this cap by allowing the pass-through entity itself to pay the state taxes—which is then deductible at the federal level, effectively reducing federal taxable income for the owners. ● How PTET Works? Under PTET, the pass-through entity pays state tax on the income before it passes to the individual owners or partners. Then, the individual owners or partners: 1. Report the pass-through income from the entity (partnership or S-corp) on their personal tax returns. 2.Claim a credit on their state tax return for the tax the entity paid. This setup can reduce federal taxable income because the business can deduct the state taxes it paid, which reduces the pass-through income reported on the individual’s federal return. ● Example of PTET in Action Scenario: - Imagine a partnership in New York with two partners, Alex and Sam. - The partnership generates $500,000 in income, and New York’s PTET rate is 10%. Steps and Tax Effects: 1. Partnership Pays State Tax: The partnership pays $50,000 (10% of $500,000) in New York PTET. 2. Deduction on Federal Return: The $50,000 PTET payment reduces the partnership’s reported income to $450,000 for federal tax purposes, which is split between Alex and Sam. 3. Pass-Through to Partners: - Alex and Sam each report $225,000 ($450,000 / 2) as income on their federal tax returns, instead of $250,000 each, because the PTET reduced the partnership’s taxable income. - This reduced federal income results in lower federal income tax for Alex and Sam. 4. Credit on State Return: Alex and Sam each receive a PTET credit on their New York state return, offsetting the state tax on their pass-through income. ●Key Benefits of PTET - Federal Tax Savings: The deduction on the federal return reduces taxable income, providing federal tax savings. - Bypassing the SALT Cap: PTET effectively allows full deduction of state taxes for pass-through entity owners, bypassing the $10,000 SALT limit for individuals. ● Potential Considerations - PTET isn’t mandatory, so entities must elect to pay PTET if their state allows it. - Rules and rates vary by state, so it's important to consult state-specific regulations. In short, PTET is a strategy to help pass-through entities reduce the federal tax burden on their owners by shifting state tax payments from personal to entity level, resulting in more favorable federal tax treatment. #taxstrategy #PTET #accounting #taxes #passThroughEntities #business

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.

We saved our client £12,102 in tax without reducing her £120K income. A client running a successful consultancy came to us feeling frustrated. 👉 She was taking £120K a year (£12,570 salary, the rest in dividends). 👉 Her tax bill was way too high and she couldn’t figure out why. 👉 She was losing thousands to HMRC unnecessarily. When we broke down the numbers, the problem became clear. Here's what her original income structure looked like: 💰 Total Withdrawals: £120,000 💰 Salary: £12,570 💰 Dividends: £107,430 At first glance, it looked simple. But here’s where things went wrong 👇 ❌ Loss of Personal Allowance Earning over £100K meant she was losing £1 of personal allowance for every £2 earned over £100K. She lost her full £12,570 personal allowance which cost her an extra £2,514 in tax. ❌ High Dividend Tax Since she took all dividends herself, her taxable dividend income was £106,930 (after the £500 dividend allowance). She was losing thousands just because her income wasn’t structured efficiently. Here’s what we did to fix it: ✅ Transferred Shares to Her Husband Her husband was already helping in the business, so we made him a shareholder and director. This allowed us to use both their tax-free allowances and lower tax bands. ✅ Split the Dividends Instead of her taking all £107,430 in dividends alone, we split them equally (£53,715 each). This significantly reduced the amount of dividends being taxed at 33.75%. ✅ Restored Her Personal Allowance By reducing her individual taxable income below £100K, she reclaimed her £12,570 personal allowance, saving her £2,514 in tax. Here’s how much she actually saved: 📌 Restored Personal Allowance Savings: £12,570 × 20% basic rate = £2,514 saved 📌 Dividend Tax Savings (Before vs. After): - Old Setup (Her Taking All Dividends) Taxable dividends: £106,930 Tax calculation: £37,700 × 8.75% = £3,298.75 £69,230 × 33.75% = £23,364.13 Total Dividend Tax: £26,662.88 - New Setup (Splitting Dividends Between Both Spouses) Each spouse’s dividends: £53,715 Taxable amount per person: £53,215 (after £500 allowance) Tax per person: £37,700 × 8.75% = £3,298.75 £15,515 × 33.75% = £5,238.56 Total tax per person: £8,537.31 Total tax for both spouses: £8,537.31 × 2 = £17,074.62 📌 Total Dividend Tax Savings: Old Tax: £26,662.88 New Tax: £17,074.62 Saved: £9,588.26 📌 Total Annual Tax Savings: £2,514 (personal allowance) + £9,588.26 (dividends) = £12,102.26 The Result: 💰 Same £120K income, but £12,102 less in tax. 💰 More disposable income as a couple. 💰 A tax-efficient business setup that works for them. Don’t assume your current setup is the best one. A little planning can save you thousands every single year. Think you’re overpaying tax? Drop me a DM.

Hybrid instruments are quietly becoming a UAE Corporate Tax audit flashpoint. Shareholder Current Account, Perpetual Notes, Profit Participating Loans, Redeemable Preference Shares. They’re everywhere in MENA structures and the UAE CT Law still doesn’t tell you what’s “debt” and what’s “equity”. But don’t mistake silence for flexibility. Article 34 pulls in the OECD arm’s length principle. Interest deductibility rules still apply. So when the instrument sits in the grey zone, the discussion won’t be what did you call it? But it’ll be what it is in substance? The OECD framework provides the governing principles for debt–equity analysis under UAE Corporate Tax. It’s about enforceable rights, real risk, real obligation and whether an independent party would fund it on these terms. IRAS guidance helps not as a binding authority, but as an illustration of how a tax authority applies OECD consistent thinking in practice. Subordination, loss absorption, economic compulsion, pricing vs behaviour, the details that decide outcomes. And yes, it’s equity under IFRS or as per FS won’t save you. Accounting is evidence, not an answer. If hybrids are in your UAE group structure, treat this as defensive hygiene. Make sure the terms, pricing, and actual behaviour line up. Keep a substance-first file that holds up when someone starts asking hard questions. This one is low-visibility today, high-impact later. CA Sanjay Agarwal | CA Neha Agarwal | CA Vishal Thappa Anand Vemuganti | Praneeth Narahari GTPN – Global Transfer Pricing Network #tax #debt #equity #tp #singapore #dubai #oecd

You must know about the new tax rules for share buybacks. Effective from October 1, 2024, the tax burden will be transferred from corporations to shareholders, changing capital distribution and investment strategies. Proceeds from share buybacks will no longer be treated as capital gains for tax purposes. Instead, they will be classified as "dividend" income, meaning that shareholders will be responsible for paying taxes on the income they receive from buybacks, rather than the corporation. The exact tax rate you’ll pay on buyback proceeds depends on your income tax bracket. So recalculate your investment strategies and study changes in your tax reporting to account for this reclassification of buybacks as dividend income. The upcoming changes are important for both companies and shareholders. While it imposes a higher tax liability on investors, it also encourages companies to have a more growth-oriented capital allocation strategy. How do you think these changes will affect financial planning? #taxes #financialplanning

Most high-income professionals overpay in taxes not by a little, but by hundreds of thousands of dollars. And the worst part? Most of them don’t even realize it’s happening I recently worked with an executive who was unknowingly missing out on over $500,000 in potential tax savings. Like many high-income professionals, she assumed her CPA was handling everything. But here’s the problem: 🚫 Most CPAs think backwards, not forwards. They file taxes based on what already happened. 🚫 They don’t integrate financial planning, investments, and tax strategy. 🚫 Some of them miss opportunities that can save you money long-term. How We Fixed It & Saved Her Over $500K ✅ 1. The HSA Strategy – $20K+ in Lifetime Tax Savings She had access to an HSA (Health Savings Account) but wasn’t using it. Why does this matter? 👉🏾HSA contributions are tax-deductible. 👉🏾The money grows tax-free. 👉🏾Withdrawals for medical expenses are tax-free. By fully funding it every year, she’ll save $20,000+ in taxes over her lifetime. But here’s the kicker: we also helped her invest it properly so the account grows instead of just sitting in cash. ✅ 2. The Roth Conversion Strategy – $500K+ in Tax-Free Growth She was anticipating losing her job and had multiple old retirement accounts just sitting there. Instead of letting those accounts stagnate, we saw an opportunity: 👉🏾She was having a low-income year, which meant she could convert $100,000 into a Roth IRA at a lower tax rate. 👉🏾That $100K will now grow tax-free—meaning if it reaches $600K or $700K in retirement, she’ll never pay a cent in taxes on that money. ✅ 3. The Bonus Strategy – Tax-Loss Harvesting We also helped her offset investment gains using tax-loss harvesting, a strategy that allows you to sell underperforming investments and use the losses to reduce your tax bill. By combining these strategies, we helped her: 💰 Save $20K+ in taxes on HSA contributions 💰 Unlock $500K+ of future tax-free income through Roth conversions 💰 Offset capital gains and lower her tax bill through tax-loss harvesting And she almost missed out on all of this because she assumed her CPA was handling everything. If you’re making multiple six figures, but you aren’t actively planning your tax strategy, you’re leaving money on the table plain and simple. The best financial strategies aren’t about making more money they’re about keeping more of what you earn. If you want to see where you might be overpaying, shoot me a message. Let’s make sure you’re taking advantage of every opportunity. P.S See the look on my face…don’t make me have to give you that look because you’re paying more than your fair share in taxes. 😂

Before you earn a single dollar as a business the IRS already has a plan for how to tax you. It's based on one thing. Your business structure. And that choice can save or cost tens of thousands. 4 main business structures in 2026: Sole Proprietorship: → default if you work for yourself → no separate business tax return → profits go straight on your personal return (Schedule C) → you pay income tax + full 15.3% self-employment tax → simple to set up, least protection, most exposure. Partnership / Multi-Member LLC: → two or more people running a business together → business files Form 1065, but pays no tax itself → each partner gets a K-1 and pays tax on their share personally → same SE tax exposure as a sole proprietor S-Corporation: → the structure many small business owners switch to — specifically to cut taxes → still a pass-through (no double tax) → you pay yourself a reasonable salary — that salary gets hit with payroll tax → remaining profit comes out as a distribution — no SE tax on that portion $150K net profit as a sole proprietor → $22,950 in SE tax $150K as S-Corp: $80K salary + $70K distribution → ~$12,240 in SE tax. Savings: over $10,000. Same income. Different structure. C-Corporation: → flat 21% federal corporate tax rate → popular with startups raising investment or planning to reinvest profits → downside: dividends paid to shareholders are taxed again (double taxation) → right structure for some — wrong for most small businesses 2026 bonus that applies to ALL pass-through structures. The 20% QBI deduction (Section 199A) is now permanent. What this means: → sole p, pships, s-corps: deduct 20% of nbi → full dedn available: ~$203,000 (single) / ~$406,000 (married) → minimum $400 deduction if your QBI >= $1,000 → wider phase-out range: more higher-income owners now qualify → c-corps do NOT get this deduction That 20% can be worth more than the SE tax savings from an S-Corp election alone. Run the numbers before assuming one structure wins. The most common mistake? Staying a sole p long after your income outgrows it. Once your net profit consistently hits $50,000–$80,000+, the S-Corp conversation is worth having with a CPA. The structure you start with doesn't have to be the one you keep. The IRS even lets you elect S-Corp status via Form 2553 mid-way — just file by March 15. Share this with someone who might be thinking of starting a new business. Follow me on Instagram @thetaxsaaab for more such posts.

The recently passed "One Big Beautiful Bill" (OBBB) introduces substantial tax benefits, creating valuable opportunities for family offices and real estate investors focused on preserving and growing wealth. Understanding and acting on these changes can significantly improve your investment strategy and offer lasting financial advantages: • Permanent 20% QBI Deduction: Provides long-term tax savings for pass-through entities, increasing profitability and investment potential. • Permanent 100% Bonus Depreciation: Enables immediate deductions on property improvements and tangible assets, significantly improving cash flow. • Increased Estate and Gift Tax Exemption: Exemption limits have increased to $15 million per individual ($30 million per couple), simplifying the transfer of generational wealth. • Expanded SALT Deduction: The limit for State and Local Tax (SALT) deductions, including property and income taxes, rises from $10,000 to $40,000 starting in 2025. Full benefits apply only to individuals with modified adjusted gross income (MAGI) below $500,000 (or $600,000 for joint filers). Above those levels, the deduction gradually phases out, ultimately reverting to $10,000 once income reaches approximately $600,000. • Enhanced Affordable Housing Incentives: A 12% increase in Low Income Housing Tax Credits makes affordable housing investments more financially attractive. Investors can achieve stronger yields while contributing to community development and meeting ESG objectives. These provisions offer more than incremental tax savings. They create strategic financial opportunities for real estate investment and wealth transfer planning. Are you prepared to take full advantage of these new tax opportunities? Now is an ideal time to review your investment and estate strategies. Taking action today can secure financial benefits for years to come.

Running a business can be one of the most powerful wealth building and tax planning tools available But only if you do it right I see the same early mistakes over and over, even from very successful business owners If you want to set yourself up correctly from Day 1 (or fix it before it gets expensive), here’s what matters most 👇 1. Get your entity election right This is foundational. The right structure can dramatically reduce taxes and expand planning opportunities The wrong one can mean: - Unnecessary self-employment taxes - No access to PTET - Reduced or eliminated QBID - Limited retirement contribution options - No QSBS - Less tax efficient for reinvesting and growing the business This decision should be proactive and can change as your business evolves 2. Keep business and personal finances completely separate Commingling accounts is one of the most common and costly mistakes It can: - Create audit risk - Destroy LLC liability protection - Turn tax prep into a nightmare - Cost you far more in professional fees and your time Clean separation from Day 1 saves money, time, and stress. 3. Track all your expenses Most business owners leave money on the table simply because they don’t track well Good tracking: - Maximizes legitimate deductions - Makes tax planning actually work - Gives you clarity on real cash flow The easiest time to do this is before the business gets “busy.” 4. Save for taxes monthly This is non-negotiable I see too many high-income business owners fall behind, then have to scramble to make things work Treat taxes like a fixed expense, not a surprise This is a huge reason we give clients new tax updates at every call 5. Understand safe harbor taxes and pay your estimates Underpayment penalties are completely avoidable. You need to Know: - Your safe harbor number - Your quarterly payment schedule - What you will get in from withholding - How income volatility affects estimates If you don’t know these numbers, you’re guessing And guessing is expensive 6. Do real tax planning 2–3x per year (not just in April) One of the biggest advantages of business ownership is tax flexibility But it only works if you plan: - Mid-year - Again in Q3 - Then finalize in December Tax planning is proactive. Tax prep is reactive 7. Setup the right retirement accounts Set up the right retirement accounts Not all retirement plans are created equal. In most cases: - Solo 401(k) > SEP IRA - 401(k) > SEP IRA and Simple's The wrong setup can cost you tens of thousands per year in missed contributions And limit Roth strategies Owning a business gives you incredible leverage... if it’s structured correctly But I see so many overpaying in taxes because they do not invest in tax planning