Every year, a lot of California S corp and partnership owners ask the same question:
“Should we make the passthrough entity tax payment?”
For a while, the answer was almost automatic: yes.
The PTE tax helped business owners work around the federal SALT cap. The business paid California tax at the entity level, got a federal deduction, and the owner received a California tax credit. Simple enough.
But 2026 changes the conversation.
The federal SALT cap is increasing, which means some owners may already get more benefit from their regular state tax deduction.
At the same time, California softened one of the harshest PTE tax rules.
In the past, if you missed or underpaid the June 15 prepayment, you were out. No election. No second chance.
Starting in 2026, you may still make the election, but your California credit can be reduced by 12.5% of the underpaid amount.
That sounds like good news. And it is.
But here’s where it gets real.
Imagine a real estate partnership that sold a property last year and had a huge tax bill.
This year, income drops back to normal. The required June 15 prepayment may still be based on last year’s big number, even though this year’s actual tax will be much smaller.
So now the owner has a choice: tie up a large amount of cash early, or underpay and accept a reduced credit.
That is not a tax form decision. That is a cash flow decision.
➝ The takeaway? Don’t treat the PTE tax election like routine compliance. Before June 15, run the numbers. The right answer depends on income, cash flow, prior-year tax, ownership, and the actual federal benefit.
Being eligible is not the same as making the smart move.
TAX REFUND
A lot of people assume “money received” means “money taxed.” That’s how surprises happen.
For 2026, some income gets special treatment, while other items people ignore, like referral bonuses, gambling winnings, or certain payouts, may still be taxable. This quiz makes one point clear: not all income is taxed the same!
Don’t guess. Classify income before tax season, not after. The IRS doesn’t care if it felt small, random, or “not really income.” If it’s taxable, it hits cash.
CLIENT ACQUISITION
Most contractors think hiding price protects the deal. It usually kills it.
In one real-life construction example, a $20,000 quote got traction not because it was cheap — but because it was explained.
When buyers understand what drives the number, they stop seeing “cost” and start seeing value, scope, and tradeoffs. From a CFO lens, that matters because confusion delays revenue. Transparency speeds it up.
You don’t need perfect pricing. You need clear ranges, real examples, and honest breakdowns. The goal isn’t to win every job. It’s to help the right customer decide faster.
CONSUMER BEHAVIOR
Most businesses are still optimizing for Google. The shift is already happening somewhere else.
AI tools are becoming the new discovery layer. Instead of scrolling search results, customers are asking AI what to buy, who to trust, and what to do next. And AI just doesn't read websites. It also analyzes videos, transcripts, captions, and social content to decide who gets surfaced as credible.
What does this mean for your financials? This is a distribution risk. If attention moves and you don’t, your cost to acquire customers goes up. This isn’t about chasing AI trends. It’s about making sure you’re visible where decisions are actually being made.
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What else is new
- Are your “profitable” jobs are actually hiding losses?
In this blog, I break down why most contractors can’t see which projects make money—and the simple job costing system that stops the silent profit leak.
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Busy crew, packed schedule, stressed bank account? That’s overhead quietly eating first.
In this video, I break down how small monthly costs push up your break-even revenue—and the simple rule contractors can use to stop the leak before more jobs become more stress.
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Stuck on something?
What if the thing slowing you down isn't effort — but the absence of a CFO-level perspective?
→ Book a call and let's tailor a high-converting strategy for your business.
Thanks for being here.
Talk soon,
Samy Basta, CPA
Fractional CFO + Tax Strategy for Builders & Developers
