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Can I fully deduct SALT through a C-corp?

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  • Can I fully deduct SALT through a C-corp?

    So, my state passed PTE legislation in order to avoid the $10k cap for SALT deduction on a Federal Level. Only problem is that my former accountant did not send in the form for S-election of my LLC to the correct agency, and therefore per my state I am a C-corp by default. I have like $15-20k of state taxes that I would love to write off. But since C-corp is not a PTE, can I still do it? To make matters worse I dissolved the LLC as I didn't think my gross income was high enough to make it worth it. It was only afterwards that I realized that PTE deduction of SALT WOULD make it worth it. So now I am looking to create a new LLC /Scorp. But in the mean time I still have the issue of needing to write off 2021 SALT.

    Any help or advice would be appreciated. Thank you very much. :-)

  • #2
    I would think it is too late for you to do anything regarding 2021. But you could start to plan now for what to do going forward. You can meet with a CPA after the pressure of the April tax deadline passes. At that point you can formulate a forward looking plan.

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    • #3
      LLC defaulting to C corp sounds strange. More to the story?

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      • #4
        Originally posted by jacoavlu View Post
        LLC defaulting to C corp sounds strange. More to the story?
        Not much else. In the state of NJ if you fail to elect your LLC as an Scorp but you file your taxes as an Scorp federally, you are automatically a Ccorp

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        • #5
          Originally posted by Screwdriver View Post

          Not much else. In the state of NJ if you fail to elect your LLC as an Scorp but you file your taxes as an Scorp federally, you are automatically a Ccorp
          so an S election was filed for fed but not state?

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          • #6
            Originally posted by jacoavlu View Post

            so an S election was filed for fed but not state?
            Yea , exactly. Well, it was sent to the wrong agency thus it didn't work out

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            • #7
              To answer your original question (like a lawyer)... it depends on how your state law was written.

              I'm out in Oregon, our private practice is a C Corp. Oregon passed a similar law last year, but it only applies to partnerships or S- Corps. Is it worth the hassle to recharacterize the business? There are a lot of expenses involved and the SALT limitation is due to expire at the end of 2025. Who knows what happens to it at that point.
              Cobin Soelberg, M.D., J.D. - Principal & Owner
              Greeley Wealth Management | [email protected]

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