Is PTET beneficial only if you'd itemize without the $10,000 SALT cap, or are there other scenarios?

Thanks for explaining! But I'm still confused - if I elect PTET, do I still pay the state taxes personally or does my LLC pay them? And does this affect my self-employment taxes at all? Would it impact my eligibility for things like retirement account contributions?

With PTET, your business entity (LLC) pays the state taxes directly instead of them flowing through to your personal return. You typically receive a credit on your personal state return for the taxes paid at the entity level, so you're not double-taxed. This strategy doesn't affect your self-employment taxes because those are calculated based on your net earnings from self-employment regardless of the PTET election. Your retirement account contribution limits remain the same as well, since they're based on your earned income which isn't changed by this tax strategy.

How does this tool actually work? Does it just calculate the numbers or does it give specific advice for your state? I'm in Illinois and heard we just got PTET recently, but my accountant seems clueless about it.

Sounds interesting but I'm skeptical. Wouldn't an accountant be able to tell you this information without needing some special tool? And does it handle all states with PTET programs or just California?

The tool actually connects you with tax professionals who specialize in business tax strategies like PTET. They analyze your documents, business structure, and income patterns to provide state-specific guidance. It gave me personalized calculations based on California's specific PTET rules, showing exactly where the savings would come from. It handles all states with PTET programs, not just California. They have specialists familiar with each state's unique implementation of these programs, which is important since the rules vary significantly between states.

How does this service work? Do they just call the IRS for you? Couldn't you just keep calling yourself and eventually get through?

This sounds like complete BS. The IRS doesn't have "specialists" in PTET - that's a state tax program, not federal. No way an IRS agent gave you specific advice about a state tax strategy. And saving $3,200? That math doesn't add up unless you're paying way more than $10k in state taxes anyway.

They use a proprietary system that navigates the IRS phone tree and waits on hold for you. When an agent is actually on the line, you get a call to connect with them. It saved me hours of frustration compared to the multiple times I tried calling myself. The IRS does have representatives who understand how state-level programs like PTET interact with federal returns - that's exactly what I needed clarity on. The agent explained how the entity-level deduction flows through to federal returns and affects AGI. The $3,200 savings came from my relatively high income bracket (32%) multiplied by the state taxes my business paid (around $10k).

Does making the PTET election affect how much estimated tax payments you need to make personally? I'm trying to figure out if I should adjust my quarterly payments if we elect PTET.

Yes, electing PTET will typically reduce the amount of estimated tax payments you need to make personally since more tax is being paid at the entity level. You should reduce your personal estimated payments to account for the tax being paid by your business entity instead. Remember that the PTET payments themselves might need to be made on a different schedule than your personal estimated payments, so you'll need to manage both payment timelines carefully.

I can share my experience with this in Colorado. When we elected PTET for our solar installation business, we were still able to claim our state renewable energy credits. The PTET created a state tax credit on our personal returns that offset our state liability, but other credits still applied after that. However, the ordering of credits mattered. Some of our smaller credits ended up unused because the PTET credit satisfied most of our liability. Check with a local tax pro because each state handles this differently.

Thanks for sharing your experience! That's exactly what I was worried about - having some credits go unused because the PTET credit is applied first. I'll definitely check with someone who understands my state's specific implementation.

This is really helpful! I'm new to understanding PTET but your explanation makes it click for me. So essentially you're getting a "double benefit" - reducing your business income that flows through to your personal return AND still keeping your standard deduction intact. One follow-up question: when you mention making estimated payments at the entity level, does this mean I'd need to set up a separate estimated tax payment schedule for my LLC? Right now I just make quarterly payments personally. Would I need to coordinate both or completely switch over to entity-level payments? Also, do you know if there are any deadlines I need to be aware of for making the PTET election? I don't want to miss any filing requirements if I decide to go this route for 2025.

Great questions! Yes, you'd typically need to coordinate both payment schedules. With PTET, your LLC would make estimated payments for the state taxes at the entity level (usually following the state's quarterly due dates), while you'd reduce your personal estimated payments to account for the lower pass-through income flowing to your 1040. For example, if you were previously making $2,000 quarterly personal payments that included state tax estimates, you might reduce those to around $1,500 and have your LLC make separate quarterly payments of roughly $1,950 ($7,800 ÷ 4) directly to the state. Regarding deadlines, this varies significantly by state! Some states require the PTET election to be made by the original due date of the entity return (typically March 15th for LLCs), while others allow it by the extended due date or even have different timing rules. A few states require the election to be made in the prior year for the following tax year. Since you're planning for 2025, you likely have time, but I'd strongly recommend checking your state's specific PTET rules soon. Some states also require estimated payments to begin in the first quarter of the election year, so you might need to make decisions and start payments by early 2025 even if the formal election isn't due until later. The timing rules are honestly one of the trickiest parts of PTET elections, so definitely verify the requirements for your specific state!