One of the casualties of the 2018 Tax Cuts and Jobs Act was the $10k limit imposed on deductible state and local tax (SALT). Prior to this act, a taxpayer could defer part of their federal taxes by making estimated state tax payments. This strategy worked particularly well for those in high tax brackets and was especially helpful if they expected a decrease in income in subsequent years.
Every tax has its loopholes however, and this one is no exception – Since this limit only applies to PERSONAL taxes, some 39 states have enacted laws allowing taxpayers with pass-through businesses to transfer their state tax liability from the personal to the corporate level. In many ways, this is even better than the old law because it works even if you don’t itemize and puts limits on how much can be paid.
The states differ on implementation and even naming but if you can tolerate another map, here is a list of the states who offer this option:
Since we are a Utah based firm, we will focus on how the Utah State Tax Commission treats the law. We are still happy to assist any of our out-of-state clients if you would like instructions on when and how to make these payments in your home state.
First, you MUST have a stand-alone, Utah-based pass-through entity such as an S-Corp or LLC. Second, the payment must be made on or before December 31st of the current year. For example, if you are prepaying your taxes for 2025 then the payment must be made on or before December 31st of 2025.
Calculating the amount is relatively easy since Utah has a flat tax of just 4.65%. Keep in mind that over payments can be carried over for up to 5 years but cannot be refunded. Utah refers to the filing as a “SALT Report” and here is a short video on how to make the payment along with the website:
If you decide to take advantage of this tax saving loophole, be sure to print your receipt and bring it to your accountant with your other important documents at tax time. And as always, give us a call if you have any questions or would like our firm to file the report for you.
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