Smart Last-Minute Tax Moves to Lower Your 2024 Tax Bill

Introduction:

As we approach the final days of the year, small business owners have one last chance to reduce their 2024 tax liability. Strategic planning now can make a significant impact, whether it's through expense management, maximizing deductions, or leveraging tax credits. Don’t let the opportunity slip away—these smart moves can help you optimize your tax strategy before December 31st.

Accelerate Expenses to Lower Taxable Income

Paying certain expenses before the year ends can reduce your taxable income and help you save on taxes. If you anticipate being in a similar or higher tax bracket this year compared to next, consider accelerating costs into 2024.

• What qualifies? Expenses like rent, vendor invoices, office supplies, or utility payments for January can be prepaid and deducted in the current year.

• How it works: For example, if you prepay six months of office rent before December 31st, that expense will lower your 2024 taxable income immediately.

This strategy is especially beneficial for businesses using the cash accounting method since expenses are deducted when paid, not when incurred.

Max Out Retirement Contributions

Contributing to tax-advantaged retirement accounts not only helps secure your financial future but also provides immediate tax benefits.

• What accounts to consider:

• 401(k): As a business owner, you can contribute up to $22,500 ($30,000 if over 50) for 2024.

• SEP IRA: Contribute up to 25% of your compensation or $66,000, whichever is lower.

• Solo 401(k): Ideal for self-employed individuals, allowing contributions as both an employer and an employee.

Every dollar you contribute reduces your taxable income, making retirement savings one of the most effective year-end tax strategies.

Utilize Bonus Depreciation

If your business needs equipment, vehicles, or software, now is the time to invest. Bonus depreciation allows you to deduct a significant portion of the cost of qualifying assets in the year of purchase.

• How it works in 2024:

While the bonus depreciation rate has decreased to 80% for 2024, it’s still a valuable tool for reducing taxable income. For example, purchasing new machinery or upgrading technology before December 31st can yield substantial savings.

• Eligible items include:

• Vehicles and machinery.

• Computers, software, and office furniture.

This strategy not only lowers your tax bill but also positions your business for growth in the coming year.

Donate to Charity

Giving back can benefit both your community and your bottom line. Charitable contributions made before December 31st are tax-deductible for businesses, provided the organization is IRS-approved.

• How to maximize deductions:

• Donate cash, goods, or inventory to qualifying charities.

• Ensure you receive proper documentation, such as receipts or acknowledgment letters, for your records.

Not only does this reduce your taxable income, but it also helps create goodwill for your business.

Don’t Wait—Act Now

Year-end tax planning doesn’t have to be overwhelming, but the clock is ticking. By implementing these strategies now, you can reduce your 2024 tax burden and set your business up for a strong start in 2025.

If you’re unsure where to start or want expert advice tailored to your situation, our team at Bernstein Tax Group is here to help. Let us guide you through the best strategies for your business. Schedule a consultation today to ensure you’re making the most of these year-end opportunities.