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As the year winds down, now is the time for small business owners to review their finances and implement strategies to optimize their tax position for the 2024 tax year. With updated regulations and available tax credits, a few proactive steps can lead to significant savings and smoother tax filing.
Here are key strategies to consider as 2024 comes to a close.
Maximize Deductions Before Year-End
1. Accelerate Business Expenses
Prepay business expenses such as office supplies, rent, or vendor contracts to lower your taxable income. This strategy is especially effective if you expect to be in a higher tax bracket in 2025.
2. Take Advantage of Section 179 Expensing
For 2024, the Section 179 limit allows you to deduct up to $1.2 million for equipment, technology, and other qualifying purchases. If you’ve been planning capital investments, making them before year-end could save thousands on your taxes.
3. Utilize Bonus Depreciation
Bonus depreciation remains at 80% for 2024, meaning you can deduct a large portion of the cost of qualifying property. Evaluate any major purchases to ensure they’re depreciated correctly.
Optimize Tax Credits for 2024
1. Research and Development (R&D) Tax Credit
If your business invests in innovation or development, this credit allows you to offset payroll taxes. It’s particularly valuable for startups and tech-forward businesses.
2. Energy Efficiency Incentives
Tax credits for energy-efficient upgrades—such as solar installations, energy-efficient HVAC systems, or electric vehicle purchases—remain in place for 2024. These improvements can lower your tax liability and operating costs.
3. Work Opportunity Tax Credit (WOTC)
This credit rewards businesses for hiring individuals from targeted groups, such as veterans, long-term unemployed, or those receiving government assistance. Review your hiring records to ensure you’re claiming this valuable incentive.
Ensure Compliance with 2024 Reporting Requirements
1099-K Reporting Threshold
The $600 reporting threshold for third-party payment processors like PayPal and Venmo is still in effect. Ensure your bookkeeping aligns with these reports to avoid discrepancies.
Employee Retention Credit (ERC) Audits
If you’ve claimed the ERC in prior years, review any IRS updates to ensure compliance with retroactive guidelines. This will help mitigate audit risks.
State Retirement Plan Mandates
Many states now require small businesses with five or more employees to offer retirement plans. Check your state’s regulations and consider implementing SIMPLE IRAs or 401(k)s if you’re impacted.
Year-End Tax Planning Tips
1. Max Out Retirement Contributions
Contributing to SEP IRAs, SIMPLE IRAs, or 401(k) plans not only reduces taxable income but also builds your retirement savings. For 2024, higher contribution limits make this an even smarter strategy.
2. Defer Income
If possible, delay receiving income or invoicing until January 2025 to defer taxes. This strategy can be particularly effective if you expect to be in a lower tax bracket next year.
3. Perform a Year-End Financial Review
Audit financial records to identify deductible expenses.
Harvest capital losses to offset gains and reduce overall tax liability.
Ensure accounts are reconciled to streamline tax filing.
Don’t Forget Key Tax Deadlines
January 15, 2025: Final estimated quarterly tax payment for 2024.
March 15, 2025: S-Corp and partnership returns due (or file an extension).
April 15, 2025: Deadline for C-Corp and individual returns
Set Your Business Up for Success in 2024
Proactive year-end tax planning is the key to saving money and ensuring a smooth tax season. With the right strategies, you can maximize deductions, leverage valuable credits, and confidently tackle your 2024 financial goals.
At CBK Pros, we specialize in helping small business owners like you navigate the complexities of tax planning and maximize tax savings. Contact us today for a free consultation, and let’s create a tailored strategy to ensure your business thrives in 2025.
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