By Jeff Strouse
JD, CRPC®, CEPA® President Prosperity Advisors
In our 3rd Quarter issue, we highlighted the upcoming expiration of the Tax Cuts and Jobs Act, which will revert many current tax provisions to the 2017 laws, beginning January 1, 2026. This change will affect not only individuals but also small businesses and their owners. We will continue to monitor this situation, especially considering the recent election. Meanwhile, here are some important considerations for 2024 year-end tax planning strategies for small businesses and their owners.
Deferring Income and Accelerating Expenses:
- Deferring Income: If you expect to be in a lower tax bracket next year, consider deferring income to the next year. For example, delay sending invoices until January
- Accelerating Expenses: Prepay expenses like rent or supplies before the end of the year to reduce your taxable income for the current year
Investing in Equipment:
- Take advantage of the Section 179 deduction, which allows you to potentially deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year
Contributing to Retirement Plans:
- Maximize contributions to retirement plans such as a 401(k) or SEP IRA. Contributions made before the end of the year can reduce your taxable income
Maximizing Tax Credits:
- Look into available tax credits, such as the Work Opportunity Tax Credit (WOTC) for hiring individuals from targeted groups, and energy tax credits for making energy-efficient upgrades
Reviewing Employee Withholding and Benefits:
- Ensure that employee withholding is accurate and consider offering additional benefits that can provide tax advantages, such as health insurance or retirement plans
Planning for Remote Employees:
- If you have remote employees, be aware of the tax implications of their locations. You may need to register and withhold payroll taxes in different states
Consulting with a Tax Professional:
- Schedule a meeting with your tax advisor to review your financials and discuss any last-minute tax-saving opportunities. As part of your overall wealth and prosperity team, we embrace the partnership with our clients’ CPAs and tax professionals to make sure we are all in unison for your benefit.
Implementing these strategies can help you manage your tax liability and set your business up for success in the new year. Let’s discuss how we can help with many aspects of your business and partner with your other key advisors.
