Want to Pay Less in Taxes This Year? Here's How

As we head into the last quarter of 2024, it’s time to think ahead about how to keep more money in your business. With new IRS regulations already in effect, small business owners have a fresh opportunity to reduce their tax burdens and free up cash for growth. Tax planning isn’t just a smart strategy—it’s essential for protecting your bottom line.

Let’s dive into the top 5 tax-saving strategies that can help you slash your 2024 tax bill and improve your financial health.

Why Every Dollar Counts: The Importance of Tax Planning for Small Businesses

Small businesses thrive on efficiency, and reducing your tax bill is one of the easiest ways to improve cash flow. The more deductions and credits you leverage, the more cash you have available for other vital areas, like hiring, marketing, or equipment upgrades.

Effective tax planning helps you:

• Reduce taxable income: You pay taxes on less income, which puts more money back into your business.

• Reinvest in growth: Savings from tax deductions can be reinvested to accelerate your business expansion.

• Avoid surprises: Proactive tax planning prevents last-minute tax shocks and helps you avoid unnecessary fines or penalties.

With the right approach, tax season can become a financial advantage rather than a burden.

IRS Updates for 2024: Changes You Can’t Afford to Miss

This year brings several important updates to tax laws that can impact small businesses. Understanding these changes is crucial to ensuring you take full advantage of the opportunities available:

1. Revised Depreciation Rules: The bonus depreciation rate has decreased to 80%, down from 100% in 2023. While this is still a valuable tax-saving tool, you’ll want to be strategic about how you time your large purchases.

2. Boosted Energy Tax Credits: Thanks to the continued implementation of the Inflation Reduction Act, businesses investing in energy-efficient upgrades, like solar panels, HVAC systems, and building insulation, can access expanded federal tax credits.

3. Higher Contribution Limits for Retirement Plans: Contribution limits for 401(k)s, IRAs, and SEP IRAs have increased in 2024, giving you more room to save on taxes while securing your financial future.

Now, let’s look at how you can leverage these updates with actionable strategies to reduce your tax bill.

Strategy #1: How to Save Big with Depreciation on Major Purchases

Did you know you can deduct the full cost of qualifying business assets like vehicles, equipment, and software? Depreciation remains one of the most powerful tax-reduction tools available to small business owners.

Here’s how it works in 2024:

• Section 179 Deduction: For 2024, the maximum deduction limit is set at $1.16 million. This deduction allows you to immediately deduct the full purchase price of qualifying equipment in the year you buy it, up to this limit.

• Bonus Depreciation: Though the rate has dropped to 80%, this still offers significant savings by allowing you to write off a large portion of your new equipment and property expenses in the first year.

By taking advantage of these depreciation strategies, you can lower your taxable income and free up cash to reinvest in your business.

Pro Tip: If you’re planning to make large equipment purchases, do it before year-end to maximize your 2024 deductions. The timing can make all the difference in your final tax bill.

Strategy #2: Cut Your Tax Bill by Offering Employee Benefits

Want to make your business more attractive to top talent while saving on taxes? Offering tax-deductible employee benefits is a two-for-one win. You can reduce your taxable income while creating a more competitive package for current and future employees.

Here are some key tax-deductible benefits to consider in 2024:

• Health Insurance: Premiums for employee health insurance plans are fully deductible. This provides significant savings for businesses of all sizes.

• Retirement Contributions: Employer contributions to employee retirement accounts, such as 401(k)s and SEP IRAs, are tax-deductible, lowering your taxable income while helping your employees save for the future.

• Education and Training: Offering programs for professional development or education assistance can also be deducted, adding another layer of savings.

Not only do these programs reduce your taxes, but they also enhance your appeal as an employer, helping you retain and attract top talent in a competitive market.

Strategy #3: Max Out Retirement Contributions for Maximum Savings

Small business owners can unlock big tax savings by contributing to tax-advantaged retirement plans. The IRS has raised the contribution limits for 2024, which means you can now save more while reducing your tax liability.

• 401(k): Contribute up to $23,000 if you're under 50, or $30,500 if you’re over 50. As a business owner, you can also contribute to employee accounts, which is tax-deductible for the business.

• SEP IRA: This allows contributions of up to 25% of an employee’s compensation, or $66,000 for the year—whichever is lower. It’s a simple way to boost your retirement while cutting your tax bill.

• Solo 401(k): If you’re self-employed, you can contribute up to $73,500, including both employer and employee contributions, allowing for substantial savings.

Contributing to these plans not only secures your financial future but also provides immediate tax benefits by lowering your taxable income.

Strategy #4: Take Advantage of Energy-Efficient Tax Credits

The government is incentivizing businesses to go green, and you should be taking advantage of these opportunities. If you’re making energy-efficient upgrades to your business property, you could qualify for significant tax credits.

Eligible upgrades in 2024 include:

• Solar Panels: Claim a 30% federal tax credit on the installation cost.

• Energy-Efficient HVAC Systems: Upgrade your heating, ventilation, and air conditioning systems to energy-efficient models and claim a tax credit.

• Building Insulation and Windows: These upgrades not only reduce energy bills but also provide tax benefits.

Energy-efficient improvements not only reduce your environmental footprint but also offer long-term cost savings and valuable tax credits. By upgrading your property, you can reduce operating costs while gaining immediate financial benefits.

Strategy #5: Timing Is Everything—Manage Your Income and Expenses Like a Pro

Smart tax planning is about more than just deductions—it’s about timing. Shifting income and expenses can be a simple yet effective way to manage your tax liability from year to year.

Here’s how to do it:

• Defer Income: If you expect to be in a lower tax bracket next year, defer some income to 2025 to reduce your taxable income this year.

• Accelerate Expenses: Conversely, if you anticipate being in a higher tax bracket next year, accelerate expenses like rent, utilities, or equipment purchases to the current year. This will increase your deductions and lower your 2024 tax bill.

By timing your income and expenses strategically, you can optimize your tax situation and improve your overall cash flow. This tactic is especially useful for businesses with fluctuating income.

Want to Save Thousands on Taxes? Let’s Make It Happen

The best time to start planning for tax savings is right now. The sooner you implement these strategies, the more you can reduce your tax bill for 2024. Whether you’re looking to maximize deductions, leverage employee benefits, or take advantage of new IRS regulations, these approaches can help you keep more money in your business.

Our team at Bernstein Tax Group is ready to tailor a tax strategy to your specific needs. Schedule a free consultation today, and let’s ensure you’re getting the most out of the latest tax-saving opportunities. Why wait until tax season? Start saving now!