Note that there is a New Pass-Through Entity Elective (PTE) instituted by the State of California. In summary, the FTB is trying to go around the IRS limits on deductibility of State Income Taxes as instituted under Trump whereby the deduction for State income taxes is limited to $10,000 under the individual filings. Under this SALT cap workaround, the S-Corporation and other pass-through entities can make an election to pay 9.3% of the entity’s CA net income for the benefit of the shareholder of the corporation and thereby deduct this amount on the S-Corp federal return. The amount paid by the entity then is credited against CA state income taxes due on shareholders’ personal returns, any amount not used being carried forward for 5 years .

Generally, if the IRS accepts this workaround, then it will be beneficiary for pass-through entities, as they will be able to deduct (PTE) Taxes paid on their federal tax returns.

The election is due to be filed by March 15, 2022 for the 2021 year via forms 3893, 3804 and 3804-CR. The FTB is currently working on developing these forms. It remains to be seen if the IRS will accept this workaround or not. We will notify you before March 15, 2022 on the subsequent developments.

If you buy another business, you can deduct most of the cost of that purchase in the more recent years and thereby reduce your current tax liability; however, future depreciation on this new business will be limited on this new business and so you are just reducing the liability right now instead of the future. You would ask if you can get a deduction in the current year against ordinary income if you buy a property and have losses, and the answer is No (read above that real estate losses are limited as you are not a real estate professional).

If you are considering buying equipment next year, you can buy one this year to get deduction.  Can charge on credit card if necessary or sign the contract in current year but pay later. 

If you are contemplating buying a automobile for the business, and if used entirely for business (does not include commute miles from home to work), you can deduct up to $25,000 of the cost of the automobile. The vehicle purchased must weigh over 6,000 pounds, according to the gross vehicle weight rating (GVWR), but no more than 14,000 pounds.  If a portion is used for commute or other personal purposes, that percentage is not deductible. 

If a new law called built back better gets ratified, can get a tax credit and other items on electric cars, but have to wait and see if it happens or not.

There is a Research and Development credit which can be used for certain R&D expenses incurred, but this would be a topic for another post.

Energy efficient property credit is a credit that allows you to claim energy saving improvements you’ve made to your home. The percentage of the cost you can claim back 22% to 26% of the cost of these energy saving improvements depending on the date of improvements of energy savings items to your home:

Most, if not all of the deductibility items have to do with either deferring tax to future years (like pension) or to accelerate deductions (like depreciation).