House Passes H.R. 1: Key Corporate Tax Credit Changes Proposed

On May 22, the House of Representatives passed H.R. 1, the One Big Beautiful Bill Act, marking a significant development in this year’s budget reconciliation process. This bill includes major proposed changes to a number of corporate tax credits that could impact businesses of all sizes.

While the House’s approval is an important step forward, the bill must still make its way through the Senate, where further negotiations and revisions are expected, before becoming law. As such, many of the provisions outlined below may still change.

Key Corporate Tax Credit Provisions in the Current House Version:

• Employee Retention Tax Credit (ERTC):

The bill proposes a retroactive cutoff date of January 31, 2024. It also includes longer IRS assessment periods and introduces new penalties targeting credit promoters.

• Paid Family and Medical Leave Tax Credit:

This credit would become permanent and feature updated calculation methods, along with changes to how state-mandated leave and employee classifications are handled.

• Domestic R&D Expenditures:

The amortization requirement for domestic research and development expenses would be suspended. Businesses could once again fully deduct qualifying expenses, including software development costs, from 2025 through 2029.

• Energy Tax Credits under the Inflation Reduction Act:

Several credits related to energy investment and production would be revised, though specifics remain under discussion.

• Credit for Employer-Paid Payroll Taxes on Employee Tips:

Beginning in 2025, the scope of this credit would expand to include more business sectors, with calculations tied to minimum wage standards.

• Employer-Provided Childcare Credit:

This credit would increase from 25% to 40% of qualifying childcare expenses (and up to 50% for qualified small businesses). The maximum annual credit would rise from $150,000 to $500,000 ($600,000 for small businesses), effective in 2026.

What’s Next?

Holmes & Associates, CPAs is closely monitoring the bill as it moves through the legislative process. We’ll continue to share updates and provide guidance once final details are confirmed and the bill is signed into law.

If you have questions about how these proposed changes may affect your business, feel free to contact us today.

What Is the PTE Tax Election?

The PTE tax is a California program that allows pass-through entities (like S-Corps or partnerships/LLCs) to pay state income tax at the entity level — instead of passing all the income down to individual owners who then pay personal income tax.

This helps owners get around the $10,000 federal SALT (State and Local Tax) deduction cap from the 2017 Tax Cuts and Jobs Act.

Key Benefits of Making the PTE Election

Federal Tax Deduction for State Taxes

• Normally, individual taxpayers can only deduct up to $10,000 of SALT on their federal returns.

• But with the PTE election, the entity pays the California tax and gets the full federal deduction.

• This lowers federal taxable income, which reduces your federal tax liability.

Credit for Owners on CA Personal Tax Return

• Even though the entity pays the tax, the owners receive a California credit for their share of that payment.

• This avoids double taxation — and often results in little or no extra state tax due personally.

Simple Example

Let’s say:

• A California S-Corp earns $500,000, owned 100% by one shareholder.

• It opts into the PTE and pays 9.3% tax = $46,500 to CA.

• That $46,500 is a deduction on the S-Corp’s federal return, saving the shareholder potentially $17,000–$20,000+ in federal tax depending on their bracket.

• The shareholder then gets a $46,500 credit on their California tax return.

Prepayment Requirement: This Is Critical

To Make the Election, You MUST Prepay by Specific Deadlines:

• June 15 of the taxable year: You must prepay the greater of:

  • 50% of the prior year’s PTE tax, or

  • $1,000

• If you don’t make this payment by June 15, you lose the ability to make the election for that year.

Then:

• The remainder is due by the original tax filing deadline (typically March 15 of the next year for calendar-year entities).

No exceptions: Missing the June prepayment disqualifies you from making the election for that year.

Requirements to Qualify

• Entity must be a qualified S-Corp, partnership, or LLC taxed as a partnership.

• All owners must be individuals, estates, or trusts (not other businesses).

• Each owner must consent to the election.

Bottom Line

Bottom Line: Why the PTE Election Matters

• Federal deduction – Lowers your federal tax liability beyond the SALT cap.

• State credit – You're not double-taxed; you receive a California credit.

• Prepayment – Absolutely required by June 15 to make the election.

• Strategic tool – Especially beneficial for high-income owners in California.

Real Estate Investors — Maximize Your Deductions

As a real estate investor, you're likely juggling property management, financing, and long-term planning, but don’t forget your tax return. Making sure you're claiming all the deductions you're entitled to can significantly reduce your tax liability. From depreciation to travel expenses, smart planning goes a long way.

Top Deductions Real Estate Investors Shouldn’t Miss:

1. Depreciation

One of the biggest benefits of owning rental property is depreciation. Even if your property has increased in market value, the IRS allows you to deduct a portion of the building’s cost each year over 27.5 years (residential) or 39 years (commercial). If you're not tracking this properly, you're leaving money on the table.

2. Mortgage Interest

Interest on loans used to purchase or improve your rental property is fully deductible. Be sure you're including mortgage statements, HELOCs, or other financing tools used for improvements.

3. Repairs and Maintenance

Fixing a leaky faucet? Replacing a broken appliance? Repairs made to maintain the property (not improve it) are fully deductible in the year incurred.

4. Travel and Mileage

If you visit your property for inspections, repairs, or showings, your mileage can be deductible. Keep detailed records or use an app to track trips to ensure accuracy.

5. Property Management and Professional Fees

Do you pay a property manager or CPA? Their fees are deductible as business expenses. This includes legal advice, tax prep, or bookkeeping related to your real estate portfolio.

6. Cost Segregation (Advanced Strategy)

If you own multiple rental properties or large buildings, a cost segregation study could accelerate depreciation by breaking down your building into components (e.g., flooring, HVAC). Ask your CPA if this strategy is worth considering.

Work With a Real Estate-Savvy CPA

Holmes & Associates has deep experience working with real estate investors in Los Angeles and beyond. We understand the nuances of investment property deductions and can help you file on time, and strategically.

Looking to maximize your deductions? We're here to help, contact us today!

Filing for an Extension? What You Need to Know About Estimated Payments

Filing a tax extension may give you more time to prepare your tax return, but it doesn’t give you more time to pay what you owe. If you’re considering filing Form 4868, it’s important to understand how estimated payments work and how to avoid unnecessary penalties or interest.

What Does an Extension Actually Do?

Filing an extension gives you an extra six months to submit your return (until October 15), but any taxes owed are still due on April 15.

If you underpay, you could be charged both late payment penalties and interest on the unpaid amount, even if you file the return itself on time.

How to Estimate Your Payment

To avoid penalties, try to pay at least 90% of your total tax liability by April 15. If you're unsure how much that is, your CPA can help with a projection based on last year’s return, current income, and any known changes.

Common Reasons to File an Extension:

• Waiting on K-1s or other third-party documents

• Needing more time for complex real estate or business deductions

• Recent life changes (inheritance, new business, relocation)

What Happens If You Overpay?

Overpaying isn’t a problem, any overage will be refunded once your return is filed. But underpaying can create a cash flow issue if you're hit with unexpected penalties later.

How Holmes & Associates Can Help

Our team at Holmes & Associates can help you file your extension properly and calculate a safe estimated payment. For real estate investors, business owners, or clients with trusts and estates, this peace of mind is worth it. Let’s make sure you’re covered, even if you’re not quite ready to file.

Best CPA for Real Estate Investors in Los Angeles: Why Holmes & Associates is Your Go-To Firm

Real estate investing comes with complex tax laws, financial planning challenges, and compliance requirements. Whether you’re a seasoned investor or just starting out, having the right CPA on your team can make all the difference. At Holmes & Associates, we specialize in helping real estate investors in Los Angeles navigate tax strategies, maximize deductions, and optimize their financial success. 

Why Real Estate Investors Need a Specialized CPA 

The real estate market in Los Angeles is competitive and constantly evolving. Investors must deal with tax planning, property depreciation, passive activity rules, and potential 1031 exchanges, areas where an experienced CPA can provide invaluable guidance. A general accountant may not have the industry-specific expertise to help you take advantage of every tax-saving opportunity, but at Holmes & Associates, we focus specifically on real estate accounting and taxation strategies. 

How We Help Real Estate Investors Maximize Profits 

At Holmes & Associates, we offer a full range of tax and accounting services tailored for real estate investors, property managers, developers, and REITs. 

Tax Planning & Compliance 

✔ Strategic tax planning to minimize liabilities and maximize deductions 
✔ Expertise in real estate professional tax status and passive activity loss rules 
✔ 1031 exchange planning to defer capital gains taxes 
✔ Cost segregation studies to accelerate depreciation benefits 

Accounting & Bookkeeping 

✔ Rental property income and expense tracking 
✔ Monthly, quarterly, and annual financial reporting 
✔ Cash flow analysis and forecasting for better investment decisions 
✔ QuickBooks setup and management for real estate businesses 

Entity Structuring & Advisory 

✔ Choosing the best business structure (LLC, S-Corp, Partnership, etc.) for tax advantages 
✔ Real estate partnership tax considerations and compliance 
✔ Understanding the tax implications of different entity structures 

Investment Consulting for Real Estate Portfolios 

✔ ROI analysis and profitability assessments for investment properties 
✔ Evaluating tax advantages for different real estate strategies 
✔ Guidance on real estate syndications, joint ventures, and property acquisitions 

What Sets Holmes & Associates Apart? 

Holmes & Associates has been helping Los Angeles real estate investors for over 30 years. Led by Larry Holmes, CPA, our firm understands the financial landscape of real estate investing. Our proactive approach ensures that investors are not just filing taxes but optimizing their portfolios for long-term success. 

We also offer a Free Tax Analysis and Consultation, where we review your tax returns, books, and financials to uncover potential tax savings and profit optimization strategies. 

Schedule a Free Tax Consultation Today 

If you’re looking for the best CPA for real estate investors in Los Angeles, Holmes & Associates is here to help. Our team specializes in real estate tax strategies, financial planning, and investment consulting to ensure you maximize your returns. 

Call us at 562.495.3331 to schedule a free tax consultation and start optimizing your real estate investments today! 

How to Pick the Right CPA Firm for Your Business

Choosing the right CPA firm for your business is one of the most important decisions you can make as a business owner. The right accountant can provide valuable insights, help with tax planning, and ensure financial stability. But with so many firms to choose from, how do you know which one is the best fit for your company? Here are a few key factors to consider: 

1. Find the Right-Sized CPA Firm 

Not all accounting firms are built the same. A large regional or national firm may not be the best fit for a privately owned business with $1 million in annual revenue. Smaller, boutique firms (like ours) often provide more personalized service, greater accessibility, and a hands-on approach that larger firms can’t match. On the other hand, if you’re running a $50 million company with complex financial needs, a firm with broader resources might be more suitable. 

2. Consider Their Experience and Longevity 

How long has the CPA firm been in business? Firms that have been around for years, or even decades, have likely built a solid reputation and navigated various economic climates. Longevity often indicates reliability, expertise, and strong client relationships. 

3. Check Online Reviews and Testimonials 

A CPA firm’s reputation speaks volumes. Checking Google reviews, testimonials, and client references can give you a sense of how they treat their clients and the level of service they provide. Pay attention to consistent themes, whether positive or negative. Do clients mention responsiveness, proactive advice, or expertise in tax planning? These insights can help you make an informed decision. 

4. Look for Industry-Specific Experience 

Does the CPA firm work with businesses in your industry? Each sector has its own tax regulations, financial nuances, and compliance requirements. A firm experienced in your industry will be better equipped to handle your accounting needs and provide proactive guidance tailored to your business. 

5. Evaluate Their Services Beyond Tax Filing 

Many business owners think of CPAs primarily as tax preparers, but a great CPA firm does much more. Consider whether they offer: 

• Proactive tax planning to help you reduce your tax burden year-round. 

• Financial forecasting and budgeting to help guide business growth. 

• Bookkeeping and payroll support to streamline operations. 

• Business advisory services to help with strategic decisions, cash flow management, and entity structuring. 

6. Assess Communication and Responsiveness 

Does the CPA firm respond quickly to your emails or calls? Are they proactive in reaching out about tax law changes or financial strategies? A firm that prioritizes client communication can be a valuable partner, especially when financial deadlines and decisions arise. 

7. Understand Their Pricing and Fee Structure 

Accounting services are an investment, but they should be transparent about their pricing. Ask how they bill, whether it’s hourly, a flat monthly retainer, or per service. The cheapest option isn’t always the best, but you should feel confident that you’re getting value for your money. 

8. Do They Fit Your Company Culture? 

Your CPA should be a trusted partner, not just a service provider. If you prefer a CPA who takes a consultative approach rather than just crunching numbers, find a firm that aligns with your business philosophy. A good fit ensures a smoother working relationship and a more strategic financial approach. 

Finding the Right CPA Firm for Your Business 

Selecting the right CPA firm is about more than just numbers, it’s about finding a financial partner who understands your business, industry, and goals. Whether you need tax planning, financial advisory services, or bookkeeping, choosing the right-sized firm with experience, a strong reputation, and a proactive approach can make all the difference. 

If you’re looking for a Long Beach-based CPA firm that specializes in working with privately owned businesses, we’d love to chat and see if Holmes & Associates is the right fit for you. 

BOI injunction lifted; FinCEN promises 30-day filing delay

Most small businesses required to file beneficial ownership information (BOI) reports now have until March 21 to comply, following a federal district court's decision to lift the last nationwide injunction that had paused these filings, according to the Financial Crimes Enforcement Network (FinCEN).

The court order, issued Monday in Samantha Smith and Robert Means v. U.S. Department of the Treasury, No. 6:24-CV-336 (E.D. Texas 1/7/25), granted the Department of Justice's (DOJ) request to stay the nationwide injunction.

FinCEN, which oversees BOI reporting under the Corporate Transparency Act (CTA), P.L. 116-283, confirmed the extended deadline applies to initial, updated, and corrected BOI reports. Read more here.

5 Common Bookkeeping Mistakes That Cost Small Businesses Thousands

Bookkeeping is the foundation of any successful small business, but even minor mistakes can lead to significant financial setbacks. Here are five common bookkeeping errors that can cost businesses thousands and how to avoid them: 

1. Mixing Personal and Business Finances 
   Using personal accounts for business expenses leads to inaccurate records and tax complications. Keep business and personal transactions separate to maintain financial clarity. 

2. Neglecting Regular Reconciliation 
   Failing to reconcile bank statements with accounting records can cause discrepancies and missed errors. Make it a monthly habit to cross-check your accounts. 

3. Improperly Categorizing Expenses 
   Misclassifying expenses can lead to inaccurate financial reports and missed tax deductions. Work with an accountant to ensure proper classification. 

4. Not Keeping Track of Receivables 
   Businesses often forget to follow up on unpaid invoices, leading to cash flow problems. Implement a system to track receivables and send reminders for overdue payments. 

5. DIY Bookkeeping Without Oversight 
   Many business owners try to manage their books without professional assistance, leading to costly errors. Partnering with an experienced accountant ensures accuracy and strategic financial planning. 

Real Estate Accounting: What Every Property Owner Should Know

Managing finances in real estate accounting involves more than just collecting rent and paying bills. Here are key accounting principles every property owner should follow: 

• Track All Income and Expenses 
  Maintain detailed records of rental income, mortgage payments, property management fees, maintenance costs, and other expenses for tax deductions and cash flow management. 

• Understand Depreciation 
  Property depreciation can reduce your taxable income but understanding how to claim it properly is essential. Work with an accountant to maximize this tax advantage. 

• Separate Personal and Investment Accounts 
  Keep rental property finances separate from personal accounts to maintain clarity and compliance with tax laws. 

• Stay on Top of Tax Obligations 
  Real estate owners must pay property taxes, rental income taxes, and sometimes self-employment taxes. An accountant can help ensure compliance and reduce liabilities. 

• Plan for Capital Gains Tax 
  When selling property, capital gains tax can take a significant portion of your profits. A tax strategist can help you plan for 1031 exchanges or other tax-saving strategies. 

Is Your Estate Plan Missing a Financial Strategy?

Estate planning isn’t just about drafting a will; it requires financial strategies to ensure assets are protected and efficiently transferred to heirs. Here’s what small business owners and investors need to consider: 

1. Tax-Efficient Wealth Transfer 
   Without proper planning, estate taxes can take a significant portion of your assets. Setting up trusts and gifting strategies can reduce tax burdens. 

1. Business Succession Planning 
   If you own a business, who will take over when you’re gone? A solid succession plan ensures a smooth transition and avoids legal disputes. 

1. Keeping Beneficiary Designations Updated 
   Ensure life insurance policies, retirement accounts, and trusts have updated beneficiaries to avoid unintended asset distribution. 

1. Avoiding Probate Delays 
   Probate can be costly and time-consuming. Placing assets in trusts and structuring ownership properly can streamline the transfer process. 

1. Coordinating with Financial Professionals 
   Estate planning should involve collaboration between an attorney, an accountant, and a financial advisor to align legal and financial strategies effectively. 

How to Reduce Taxes and Protect Your Business for the Future

Small business owners often overpay on taxes due to a lack of proactive planning. Here are key strategies to reduce your tax liability while securing long-term financial success: 

Maximize Deductions and Credits 
Business expenses like home office costs, vehicle use, and employee benefits may qualify for deductions. An accountant can help identify savings opportunities. 

Structure Your Business for Tax Efficiency 
The right business entity (LLC, S Corp, C Corp) can significantly impact taxes. A CPA can help determine the best structure for your goals. 

Take Advantage of Retirement Plans 
Contributing to SEP IRAs, Solo 401(k)s, or other retirement plans reduces taxable income while building long-term wealth. 

Defer Income and Accelerate Expenses 
Delaying income recognition and prepaying deductible expenses before year-end can optimize your tax position. 

Use Estate and Succession Planning to Your Advantage 
Business succession planning strategies can reduce tax liabilities while ensuring smooth transitions. Additionally, trusts and family partnerships may offer valuable tax benefits. 

Tax Relief for California Wildfire Victims: What You Need to Know

Tax Relief for California Wildfire Victims

The IRS has announced tax relief for individuals and businesses affected by the recent California wildfires, including those impacted by the Palisades Fire and Eaton Fire in Altadena.

 New Deadline: Affected taxpayers now have until October 15, 2025, to file returns and make payments.

Deductions & Assistance: Options available for claiming disaster-related losses and accessing additional relief.

If you or your business has been impacted, check out the full details on eligibility, extended deadlines, and available tax benefits.

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