Understanding Tax Planning for SALT Taxes
State and local tax (SALT) planning has become increasingly important for businesses in recent years. A recent study revealed that SALT taxes consumed 48% of surveyed companies' overall in-house tax staff time and accounted for 46% of the company's total tax burdens. This trend is largely driven by state and local jurisdictions raising income, sales, and other taxes in an effort to avoid budget deficits and expand social programs. As a result, business owners must pay closer attention to these taxes, as they are steadily increasing both directly and indirectly.
Direct increases in SALT taxes occur through higher tax rates and the introduction of new forms of taxation by state and local governments. These rising taxes put added pressure on businesses, especially those structured as flow-through entities, such as sub-chapter S corporations, limited liability companies (LLCs), or partnerships. However, the burden is not just about higher rates. SALT taxes are also increasing indirectly due to the fact that they are not deductible for individual alternative minimum tax (AMT) purposes, further raising the after-tax cost for business owners.
In this challenging climate, business owners must prioritize thoughtful SALT tax planning to avoid overpaying and ensure they have enough cash to reinvest in their businesses. Proper planning can help minimize the impact of SALT taxes on your bottom line and ensure your business remains financially healthy in the face of rising state and local tax burdens. Working with a tax advisor who understands the complexities of SALT taxes is essential for navigating this increasingly important aspect of business tax strategy.
About Protego Advisers:
We specialize in crafting strategic plans that help businesses minimize their overall tax liabilities while strictly adhering to legal standards. The U.S. tax system is one of the most intricate and historically complex financial frameworks in the world. Our expertise allows us to navigate this system on behalf of our clients, enabling them to retain more of their earnings with confidence and compliance.