As we approach the end of the year, small business owners should consider the following year-end tax ideas to minimize their tax liability for tax year 2024:
1. Maximize 401(k) and other retirement plan contributions: Contribute as much as possible to your 401(k), SEP-IRA, or SIMPLE IRA to reduce your taxable income. The contribution limits for 2024 are $23,000 for 401(k), lesser of 25% or $69,000 for SEP-IRA. SIMPLE IRA contribution limits for 2024 are $16,000.
2. Take advantage of the Small Business Health Care Tax Credit: If you have fewer than 25 full-time equivalent employees and an average annual wage of $62,000 or less, you may be eligible for a tax credit of up to 50% of your health insurance premiums.
3. Accelerate deductions: Pay bills and expenses that can be deducted on your tax return before December 31st to reduce your taxable income. This includes:
* Rent or mortgage payments
* Utilities and insurance premiums
* Inventory and supplies
* Travel and entertainment expenses
4. Defer income: Consider delaying income until January 2025 to reduce your taxable income for 2024. This could include:
* Delaying customer payments
* Postponing bonuses or commissions
* Deferring interest or dividends
5. Use the Section 179 deduction: If you're purchasing new equipment, software, or furniture, consider using the Section 179 deduction to write off the full cost in the first year. The deduction limit for 2024 is $1,220,000.
6. Take advantage of the Research and Development (R&D) Tax Credit: If you're conducting research and development activities, you may be eligible for a tax credit of up to 20% of your qualified research expenses.
7. Contribute to a Health Savings Account (HSA): If you have a high-deductible health plan, consider contributing to an HSA to reduce your taxable income and save for future medical expenses.
8. Review and adjust your business structure: If you're a sole proprietor or single-member LLC, consider converting to a partnership or S corporation to reduce your self-employment tax liability.
9. Consult with a tax professional: It's essential to consult with a tax professional to ensure you're taking advantage of all the tax savings opportunities available to your business. They can help you navigate the complex tax laws and ensure you're in compliance with all applicable regulations.
Remember to keep accurate records and documentation for all business expenses and income to support your tax deductions and credits.
As always, if you need help with your bookkeeping, I would love the opportunity to discuss your business needs and how I can help. Have a great day!
James Harness
Owner, HarSource Accounting
LinkedIn: https://lnkd.in/d64GaCtw
Website: https://harsourceaccounting.com
Add comment
Comments