California PTE Tax 2025 Benefits Deadlines Action Steps
- Pathfinding Consultants
- Apr 28
- 6 min read
Updated: May 6
The high taxes you have to pay as a California business owner are nothing new to you. But did you know there is a powerful tool that can save you a lot of money on federal taxes? For small and medium-sized companies like yours, the California Pass Through Entity Tax, also known as the Pass-Through Entity Elective Tax, rules the world. The goal is to get around the federal $10,000 SALT (State and Local Tax) limit so that you can claim more of your state taxes through pass through taxation. We'll go over everything you need to know about the California PTE tax in 2025, including its benefits, due dates, typical mistakes, and what you can do to save the most money with a tax plan pass through. This article will give you the tools you need to take charge of your tax plan pass through, whether you run an S-Corp, a partnership, or an LLC.
What Is the California PTE Tax?
Some businesses in California, like S-Corporations, partnerships, and LLCs that are taxed as partnerships or S-Corps, can pay their state income taxes at the entity level instead of the person level, thanks to the California Pass Through Entity Tax. After that, you can write off this tax as a business cost on your federal tax return. This lets you get around the $10,000 federal SALT cap through pass-through taxation. For example, a pass through taxation example would be an LLC paying state taxes directly, allowing owners to deduct the full amount federally..
Why Was the PTE Tax Created?
In 2017, the Tax Cuts and Jobs Act capped SALT deductions at $10,000, hitting high-tax states like California hard. For business owners paying tens of thousands in state income or property taxes, this cap meant higher federal tax bills. The California PTE tax, introduced in 2021, is a workaround that lets pass through entities deduct state taxes fully as a business expense, not as a capped personal deduction. as shown in a pass through taxation example. This makes the tax plan pass-through a critical strategy for reducing federal tax liability.
Who Can Use the California PTE Tax?
Eligible businesses: Pass through entities that can take part are S-Corps, partnerships, and LLCs that are treated as partnerships or S-Corps.
Ineligible businesses: One-person businesses, single-member LLCs (unless taxed as S-Corps), and businesses that don't make any California taxable income aren't qualified.
Pass through taxation example: if your LLC makes $500,000 and pays $50,000 in California state taxes, you can deduct the whole $50,000 on your federal tax return, not just $10,000. This is because you paid the California PTE tax. Depending on your federal tax rate, this could help you save a lot of money.
Why the California PTE Tax Matters for Your Business
The California PTE tax is one of the few times you can lower your federal tax bill. This is why it's important:
Bypass the SALT Cap: Don't use your personal deduction for state taxes; instead, write them off as a business cost.
Significant Savings: This can save pass through entities thousands of dollars in federal taxes every year if they make money.
Competitive Edge: California is one of few states offering this benefit, giving local businesses a tax advantage.
Use accounting software to keep track of your state tax payments and make sure they are properly labeled as California Pass Through Entity Tax payments. This makes tax time go more smoothly and helps your accountant get the most out of your benefits.
Common Question: How much can I save with the PTE tax? How much you save depends on how much money you make and how much tax you pay. If your federal tax rate is 37% and you deduct $50,000 in PTE taxes, you could save $18,500 on your federal taxes.
Are You Eligible for the California PTE Tax?
To be eligible, you just need to pay attention to a few details:
Eligibility Criteria
Your company must be treated as an S-Corp, a partnership, or an LLC.
You need to make enough money in California to be taxed.
All members or owners must agree to the election of the PTE.
Who’s Not Eligible?
Single-member LLCs (unless treated as S-Corps)..
Firms that don't make any money in California.
The C-Corporation.
Start planning your taxes the smart way — book an appointment with us today. Consult with us to review how your business is structured. If your LLC only has one member, switching to S-Corp status could help you take advantage of California PTE tax benefits. Keep thorough records of your finances to show that you are eligible during checks as part of your tax plan pass through.
Key Deadlines for California PTE Tax in 2025
If you don't meet these dates, you might lose your California PTE tax benefits, so mark them on your calendar:
Action | Due Date |
First PTE payment (50% of prior year or $1,000 minimum) | June 17, 2025 |
File tax return and elect PTE | March 15, 2026 |
Final PTE payment (balance owed) | March 15, 2026 |
Important: If you don't make the payment by June 17, 2025, your PTE election will be null and void for the whole year.
Tip: To remember to do your books on June 17 and March 15, set your accounting software to remind you automatically. To make payments on time, use the California Franchise Tax Board's (FTB) Web Pay method.
Pathfinding Consultants can help you stay PTE-compliant!
Don't miss the California PTE tax dates. Expert accounting makes sure that everything is kept straight and payments are made on time. Schedule your planning session by June 1, 2025, to save time and money with your tax plan pass through.
How to Elect and Pay the California PTE Tax
It's easy to choose the California PTE tax, but you need to be careful:
Make the Election: You need to send the election along with your main tax return, which is due March 15, 2026, or an extension. Everyone must agree.
Pay the First Installment: Pay at least $1,000 or 50% of the PTE tax from the previous year through FTB's Web Pay by June 17, 2025..
Complete Final Payment: The Due date for the last payment is March 15, 2026.
Document Everything: In case of an audit, make sure that your bookkeeping system keeps track of payments and votes.
Pass through taxation example: If your 2024 PTE tax were $10,000, you’d pay at least $5,000 by June 17, 2025. If your 2025 tax is $12,000, you’d pay the remaining $7,000 by March 15, 2026.
Common Mistakes to Avoid with California PTE Tax
Business owners can make mistakes. Do not fall into these traps:
Missing the June 17 Payment: This is the most common mistake that will invalidate your victory.
Underpaying the Minimum: Make sure your first payment is at least $1,000, or 50% of the total amount due.
Not Keeping Good Records: If you don't keep your books well, it might be hard to show your pass through taxation election during an audit.
Late Filings: If you miss the limit on March 15, 2026, you could be fined.
Advice That Can Be Used: Keep track of PTE payments separately from other costs with accounting tools. Every month, go over your books to find mistakes quickly.
Action Items for Business Owners in 2025
Ready to use the California PTE tax to your advantage? Do these things:
Consult with us early: Meet by June 1, 2025, to make sure you're eligible and get an idea of how much you'll be paid.
Review Last Year’s PTE Tax: Check your financial files to find out how much you owe on June 17.
Set Up Web Pay: If you want peace of mind, use FTB's Web Pay to set up automatic payments.
Document Everything: Use your accounting software to keep track of voting forms and payment confirmations.
Plan for 2026: Use your accounting software to keep track of voting forms and payment confirmations.
Example: Sarah, who owns an S-Corp, saved $15,000 in federal taxes last year thanks to the California PTE tax. To avoid making mistakes that cost a lot of money, she used her accounting software to keep track of payments and set calendar alerts for due dates.
How Pathfinding Consultants Can Help Your Business
If you follow the steps above, you can handle the California PTE tax on your own, but it will take time, accuracy, and skill to get it right. We can help with that at Pathfinding Consultants. We make it easier for you to file your California PTE taxes so you can focus on building your business. We are experts in bookkeeping and accounting for small and medium-sized businesses.
Our services include:
Accurate Payment Tracking: We sort and keep an eye on PTE payments in your books.
Deadline Management: We send reminders and make sure Web Pay entries are made on time.
Compliance Support: We work with your CPA to keep records of elections and avoid problems during audits.
Year-End Reviews: We get your books ready so that tax time goes smoothly.
Conclusion
The California PTE tax is a great way for business owners to avoid the federal SALT cap and save a lot of money on taxes. You can get big cash benefits in 2025 if you know what they are, meet important dates like June 17, 2025, and don't make common mistakes. Plan ahead of time, use your accounting software, and think about getting help from Pathfinding Consultants to make the process go smoothly.
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