SALT Workaround After the One Big Beautiful Bill: How Business Owners Can Save Thousands in 2025
The SALT Workaround Survives the One Big Beautiful Bill
When Congress passed the One Big Beautiful Bill, many tax-saving provisions were debated—and some came dangerously close to disappearing. One that survived is the SALT (State and Local Tax) workaround for business owners, and it can be worth tens of thousands of dollars in savings if used correctly. Mark J. Kohler and Mat Sorensen broke it down on a recent episode of the Main Street Business Podcast, explaining the three steps to qualify for the SALT workaround and the three steps to implement it. This is advanced tax planning, but when done right, it can mean serious savings for S corporation owners in high-tax states.
Watch the full episode of the Main Street Business Podcast for the complete breakdown.
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Why the SALT Workaround Matters in 2025
The SALT deduction allows taxpayers to deduct certain state and local taxes from their federal taxable income. Under the new law, the deduction cap has been raised from $10,000 to $40,000—but that still might not be enough for many high-income business owners.
Here’s why: the $40,000 cap includes state income tax, property tax, vehicle registration taxes, and more. For business owners in high-tax states, this cap can be used up quickly—leaving them paying federal taxes on income they already sent to the state.
That’s where the SALT workaround comes in.
How the SALT Workaround Works
Instead of paying your state income tax personally, you have your S corporation pay it at the entity level. This shifts the tax payment onto the business return, where it’s fully deductible at the federal level, and then credited on your state return—without counting toward the SALT cap.
The result? A larger federal deduction and less taxable income.
3 Steps to See If You Qualify
- Check if you’re hitting the $40,000 cap
Add up your state income tax, property taxes, and other local taxes. If they exceed $40,000, the workaround could benefit you.
- Confirm you have an S corporation
The workaround is designed for S corporations (or LLCs taxed as S corps). W-2 employees without a qualifying business entity can’t use this strategy.
- Verify your state allows it
Currently, 36 states allow the SALT workaround. Each has its own rules, deadlines, and forms.
3 Steps to Implement the SALT Workaround
- Make the payment from your S corporation
State tax payments must come from the S corp bank account—not your personal account.
- Follow your state’s rules and deadlines
Deadlines can vary widely. For example, California requires an election and minimum payment by June 1, while New York’s cutoff is September 15.
- Report it correctly on your tax returns
Work with your tax advisor to ensure it’s reported on both your federal and state returns in the right place. A small reporting error can trigger an audit or lost deduction.
Why You Need to Act in 2025
Tax planning for 2025 happens in 2025—not when you file next year. To take advantage of the SALT workaround, you must implement it before year-end. This means scheduling a tax planning session with your advisor in Q3 or Q4 to map out the payment timing, amounts, and reporting strategy.
The Bottom Line
The SALT workaround isn’t for everyone—but if you:
- Own an S corporation
- Live in a high-tax state
- Pay more than $40,000 in combined state and local taxes
…it could save you tens of thousands of dollars each year. As Mark and Mat emphasized, the key is planning ahead and working with a tax professional who understands the rules in your state. Done right, this strategy is 100% legal, 100% IRS-approved, and one of the most valuable tools in the 2025 tax playbook.
