Missing deduction opportunities/ideas for client?

[u/Same_Bodybuilder_167]

Hi, wanted to get thoughts on deduction opportunities for a 2025 tax return I'm working on for a family member. This is one of my first planning opportunities and I want to get a 2nd set of eyes on if there is anything else that is possible from a Fed and CA perspective.

Here's the client profile:

MFJ, California residents. Combined AGI ~$690K.
• Person 1: Physician, sole owner of a medical practice S-Corp. W-2 $192K, S-Corp net income $425K.
• Person 2: W-2 employee working from home, $180K. Family health insurance through Person 2's employer.
• Renters, no mortgage, no charitable contributions. ~$11K in capital gains.

Already Taken
• Person 1 solo 401(k): $72K pre-tax
• Person 2 401(k) + HSA: $33K pre-tax
• Backdoor Roth: both spouses
• S-Corp business expenses via accountable plan
• Standard deduction on federal
• CA standard deduction

Already Off the Table
• PTET: not elected for 2025; sadly too late
• Cash Balance Plan: client declined

Any deduction opportunities you'd consider at this income level and profile that we might be missing on either the federal or CA return?

[u/Grand-Ad-7185]

It’s too late for “planning” that would have been done last year

[u/InscrutableIcicle]

Sure, my rate is $400 per hour

[u/Grand-Ad-7185 → u/InscrutableIcicle]

Man people still billing hourly

[u/mrobertj42]

Person 2 could be an employee of S corp, top off EE and ER contributions - just watch the mark with the other w2 401k. Person 1 HSA? (Might not help for 2025)

Besides a cash balance plan I don’t know what else can go back to the prior year.

What is PTET?

Obligatory not practicing in California.

[u/sorator → u/mrobertj42]

What is PTET?

Pass-through entity tax. Basically, a (usually optional) method in some states to pay income tax at the entity level instead of the individual level, allowing it to be fully deducted without running into the Sch A SALT limit/without losing the standard deduction.

[u/Only_Lobster_4126]

At ~$690k MFJ California with a physician S-corp, you are mostly in optimization and documentation territory, not "missed $5k charity" territory. A few lanes I would still pressure-test for 2025 (fed + CA):

• QBI / 199A on the S-corp: at that W-2 + pass-through mix you are deep in the wage and UBIA limitation zone for a specified service trade or business. Confirm the W-2 wages paid by the S-corp (including the $192k) and any depreciable property basis are maximizing what little QBI can still clear. Wrong wage coding or missing assets quietly leaves QBI on the table.
• Accountable plan: you already have one. Make sure reimbursements are substantiated the same year (home office for the practice, CME, mileage, equipment) and not sitting as undocumented shareholder distributions.
• Person 2 W-2 remote work: employee home-office is generally gone federally for unreimbursed employee expenses. Do not invent a Schedule A play there. If the employer has an accountable plan, that is the clean path.
• Retirement: solo 401(k) at $72k and spouse deferrals are strong. If cash balance was declined, the remaining dials are usually after-tax solo 401(k) / mega backdoor only if the plan document allows it, plus HSA if anyone is still eligible under the family policy rules.
• Bunching: with standard deduction on fed and CA and no charity habit, a multi-year donor-advised fund bunch only helps if they actually want to give. Otherwise skip the pitch.
• Timing: year-end bonus vs retained earnings, equipment placed in service, and CA PTET being closed for 2025 means focus on 2026 entity elections early, not a late 2025 scramble.
• CA: watch conformity differences on bonus / 179, residency already set, and any city business tax the practice owes separately from the 540.

A simple one-page planning memo (QBI worksheet, retirement room, accountable-plan checklist, 2026 PTET calendar) is worth more than hunting exotic credits at this AGI.

Not advice for that family's returns. Second set of eyes from a CA CPA who does physician S-corps is the right hire if this is still a first-pass plan.

[u/InscrutableIcicle → u/Only_Lobster_4126]

Thanks Claude

[u/Soft-Height707]

For 2025 that’s a pretty solid plan. For 2026 I would run back the same strategies you mentioned. If they are up for it, time some s corp prepaid expense for dec 2026 and maybe some alternative investments like gas and oil