How Business Owners Can Take Advantage of the Expanded SALT Deduction in 2025
As a business owner, keeping more of your money is always a priority. With the tax laws in flux, the expanded SALT (State and Local Tax) deduction in 2025 presents a great opportunity to lower your taxable income and keep more funds in your pocket. By understanding how this deduction works and taking strategic actions, you can maximize the savings and reduce your tax burden.
Let’s explore how business owners can make the most of the expanded SALT deduction in 2025 and what steps you need to take to optimize your tax strategy.
What is the SALT Deduction?
The SALT deduction allows you to deduct state and local taxes—including property, income, and sales taxes—on your federal tax return. This deduction is particularly beneficial for business owners, as it helps reduce overall taxable income, saving you money.
In 2025, the SALT deduction has been expanded, allowing for larger deductions on more types of state and local taxes. This is a great opportunity for business owners to save on taxes, especially if you’re located in high-tax states or own significant property.
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How Does the Expanded SALT Deduction Help Business Owners?
For business owners, taxes are one of the largest costs. The expanded SALT deduction allows you to deduct:
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State Income Taxes: The expansion increases the amount you can deduct for state income taxes, which can be significant depending on where your business is located.
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Local Income Taxes: If your business is subject to local income taxes, you can now deduct a larger portion of those taxes, further reducing your taxable income.
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Property Taxes: Many businesses own property, and this expansion allows for larger deductions on property taxes, which can be especially beneficial if your business owns real estate.
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Sales Taxes: If you operate in a state with high sales tax, the expansion of this deduction helps you deduct more of the sales tax you pay.
This expanded SALT deduction offers several avenues for tax savings, meaning more of your money stays in your business.
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Why Business Owners Should Care About the Expanded SALT Deduction
Here’s why it’s essential to take full advantage of the expanded SALT deduction:
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Lower Your Taxable Income: The more you can deduct, the less income you’re taxed on, meaning you owe less in federal taxes.
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Keep More Money for Reinvestment: The savings you achieve from these deductions can be reinvested back into your business, fueling growth, innovation, and expansion.
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Increase Your Cash Flow: By reducing your tax liability, you free up capital that you can use to improve your business operations, innovate, or expand.
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Stay Compliant and Strategic: The changes in tax laws can be complex. By working with a tax advisor, you can make sure you’re staying compliant while strategically maximizing your deductions.
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Steps to Take Full Advantage of the Expanded SALT Deduction
To ensure you’re making the most of the expanded SALT deduction, here are some key strategies:
1. Track Your State and Local Tax Payments
Start by reviewing your state and local tax payments. Make sure to keep track of the following:
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State income tax payments (both personal and business-related)
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Local taxes (e.g., city or county taxes)
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Property taxes (related to any real estate owned by the business)
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Sales tax (if applicable to your business operations)
The more accurate and detailed your record-keeping, the easier it will be to claim the maximum allowable deductions.
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2. Consider Prepaying Taxes
If you anticipate a large tax bill in the coming year, consider prepaying your state and local taxes before the end of the current year. By doing so, you can claim those taxes as deductions on your next return, reducing your tax liability sooner rather than later.
3. Maximize Property Tax Deductions
If your business owns property, the expanded SALT deduction allows for larger deductions on property taxes. Consider working with a property tax consultant to ensure you’re claiming all eligible deductions, including taxes paid on real estate, equipment, and other business assets.
4. Consult with a Tax Advisor
The complexity of tax laws means it’s vital to work with a tax advisor to navigate the expanded SALT deduction. A tax professional can help you:
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Identify all eligible state and local taxes that can be deducted.
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Prepay taxes to maximize deductions for the current year.
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Develop a strategy to reduce your overall tax burden by taking full advantage of the SALT deduction.
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5. Plan for the Future
In addition to the SALT deduction, plan for other long-term tax-saving opportunities, such as contributing to retirement plans (e.g., 401(k), SEP IRA), taking advantage of business-related tax credits, and leveraging depreciation to reduce taxable income.
Additional Tax-Saving Strategies for Business Owners
The expanded SALT deduction is just one tool in your tax-saving toolbox. Here are a few other strategies that can help reduce your business taxes:
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Maximize Deductions for Business Expenses: You can deduct many business expenses, including office supplies, employee benefits, travel, and more.
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Invest in Tax-Efficient Retirement Accounts: Contributing to retirement accounts, such as a SEP IRA or a defined benefit plan, reduces your taxable income and ensures long-term financial security.
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Take Advantage of Depreciation: Depreciate business assets over time to reduce your taxable income each year.
By combining the expanded SALT deduction with other tax-saving strategies, you can significantly reduce your overall tax burden.
How to Prepare for the Expanded SALT Deduction in 2025
Here’s how you can prepare for the expanded SALT deduction:
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Review Your Tax Payments: Ensure all state and local tax payments are properly documented.
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Work with a Tax Advisor: Schedule a consultation to optimize your SALT deductions and implement additional tax-saving strategies.
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Plan for the Future: Look ahead to next year’s taxes and consider prepaying state and local taxes where possible.
Planning ahead allows you to take full advantage of the expanded SALT deduction in 2025, ensuring you’re saving the maximum amount possible.
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FAQ: Expanded SALT Deduction for Businesses
1. How much of my state and local taxes can I now deduct in 2025?
The expanded SALT deduction allows for a larger deduction of state income taxes, property taxes, and sales taxes, giving you more opportunities to reduce your taxable income.
2. Can I prepay my taxes to maximize my deduction?
Yes, prepaying your state and local taxes can help you maximize deductions for the current tax year. Be sure to consult with a tax advisor to ensure you’re prepaying the correct amount.
3. Is the expanded SALT deduction available for all business types?
Yes, the expanded SALT deduction applies to all types of businesses, including sole proprietorships, partnerships, corporations, and LLCs. However, eligibility and the amount you can deduct will depend on your specific circumstances.
4. What other tax-saving strategies should I consider for my business?
In addition to the expanded SALT deduction, consider maximizing business expenses, contributing to tax-advantaged retirement plans, and utilizing depreciation deductions to reduce your taxable income.
At Provident CPAs, we specialize in helping clients adapt to changing economic conditions. Whether you’re a business owner or an individual looking to optimize your tax strategy, our team is here to guide you through the complexities of today’s tax landscape. Contact us today to learn more about how we can help you achieve financial independence, even in the face of economic uncertainty.