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Hi there, yes you can take advantage even with an extension but keep in mind that to elect in to the PTE, you must have made an estimated payment of either $1,000 or 50% of what you paid in prior years PTE payment (if you did it prior year) by June 15 of the tax year. In other words, if you wanted to take advantage of the PTE for 2023, you needed to have made an estimated payment by June 15, 2023. As for the 9.3% deduction, it will be in the form of lower taxable income from your passthrough entity. The payment of the taxes to California becomes deductible as an ordinary business expense, thus reducing your federal taxable income that you'll be including in income on your schedule E. Hope that helps.

Not gross income, but California taxable income -- which is basically your gross income minus expenses and adjusted for income/deductions excludible/not excludible from the CA code.

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Yes, California taxpayers would have to pay state income tax on their personal tax returns (CA 540). Rather than paying the tax directly to CA on the individual form, the PTE allows you to pay it for your business, thus converting a non-deductible tax to a deductible one for business purposes.

@@AdviseRE Thank you very much for this explanation, that is clear. 👍

We are in Los Angeles

Sorry to hear that, what could we do to help clarify?

I agree and it isn't the video that is the problem. We have been using Turbo Tax for years for personal and S-Corp and I just stumbled on this topic and went on a deep dive. We have enough itemized deductions that we always get a refund on our personal CA. The company never pays more than the mandatory $800 for CA. We paid the $800 in April and the company's net income at 9.3% would be less than $800. Would the $1000 requirement still be valid? And if it wasn't specified as a 3804 payment up front would that be a problem?

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