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As the year draws to a close, it’s the perfect time for business owners to take control of their finances and implement smart tax strategies. By planning ahead, you can reduce your tax liability, maximize deductions, and start the new year with a clear financial roadmap. Whether you’re a seasoned entrepreneur or a small business owner just getting started, these year-end tax tips for 2024 will help you make the most of your business finances.
Your financial statements are the foundation of effective tax planning. Take time to review your income statement, balance sheet, and cash flow statement for 2024. Look for discrepancies, unusual expenses, or missed deductions that could impact your taxes. Accurate financial records ensure you’re prepared to file and take advantage of every possible tax benefit.
Pro Tip: Use accounting software like QuickBooks Online to streamline your record-keeping. Regular reconciliation throughout the year can save you from scrambling in December.
Make the most of available deductions to lower your taxable income. Common deductions for business owners include:
Purchasing necessary supplies or equipment before year-end can also help you increase your deductions for 2024.
Important: Keep detailed records and receipts for all expenses to substantiate your deductions in case of an audit.
Under Section 179 of the tax code, businesses can deduct the full purchase price of qualifying equipment and software purchased during the year. For 2024, the deduction limit is $1.16 million, with a spending cap of $4.05 million. If your business needs new machinery, vehicles, or technology, now is the time to invest.
Pro Tip: Make sure the equipment is placed in service by December 31, 2024, to qualify for the deduction.
Retirement contributions are a win-win for business owners: they reduce your taxable income and help you save for the future. Consider contributing to a qualified retirement plan such as:
If you don’t already have a retirement plan, you may still have time to set one up before the year ends.
In 2024, businesses can claim bonus depreciation for certain qualified property at 80% of the asset’s cost. This phased reduction (down from 100% in 2023) means you can still save significantly if you make eligible purchases this year.
If you’ve been making quarterly estimated tax payments throughout 2024, now is the time to check whether you’ve paid enough. Underpaying taxes can result in penalties, while overpaying reduces your working capital. Consult with your accountant to ensure your estimated payments align with your actual income and tax obligations.
If your business operates on a cash basis, you may be able to reduce taxable income by deferring revenue to 2025. For example, delay invoicing clients until January for work completed in December. While this can lower your 2024 tax bill, consult with a tax advisor to ensure it aligns with your overall financial strategy.
Tax credits are often more valuable than deductions because they directly reduce your tax liability. Some popular credits for 2024 include:
If your business is owed money that’s unlikely to be collected, you can write off bad debts as an expense. This reduces your taxable income and cleans up your balance sheet. Make sure you’ve documented all efforts to collect the debt to support your deduction.
Many business owners focus on federal taxes but overlook state and local tax obligations. Research specific deductions or credits available in your state to maximize savings. States like Nevada, Texas, and Florida have no income tax, while others may offer unique benefits for small businesses.
If you sell physical products, conducting a thorough inventory count at year-end is essential. Write down any obsolete or unsellable inventory to claim a deduction. Accurate inventory records also help you plan purchases for the new year.
The best year-end tax strategy is proactive planning with a tax professional. A CPA or enrolled agent can help you identify opportunities to save, minimize liability, and ensure compliance with changing tax laws. Schedule your meeting early to avoid the last-minute rush.
Bonus Tip: If you’re behind on taxes or owe back taxes, a professional can guide you on payment plans or resolution strategies to prevent penalties.
Stay ahead by understanding upcoming tax changes. The Tax Cuts and Jobs Act provisions, such as bonus depreciation reductions and individual tax rate changes, may significantly impact your planning. A tax professional can help you position your business for success in the new year.
Year-end tax planning is an opportunity to take charge of your finances, maximize savings, and set your business up for success in 2025. With these strategies, you’ll not only reduce your tax bill but also gain valuable insights into your financial health.
Don’t wait until the last minute—start reviewing your records, consulting your tax advisor, and implementing these tips today. Your future self (and your wallet) will thank you!
