As a small business owner, strategically managing your finances is crucial to success. With the second half of 2024 underway, now is a great time to focus on what no one likes to talk about but can make a massive difference to your bottom line: taxes. This post discusses some business tax moves you can make in Q3&4 to save taxes this year.
I know it's not even close to tax season, but hear me out. Strategic tax planning affects your bottom line by helping you maximize deductions and minimize your tax liability. So, thinking about these strategies now gives you plenty of time to take action rather than scrambling in December (or worse yet, next March) when it may be too late. Trust me. Your future self will thank you.
This is the first article of a 2-part series, so my apologies if you get so excited by the time you get to the end of this article that you're bummed you have to wait another week to finish it (hey, it could happen). In that case, spend the time between now and next week exploring the suggestions I've outlined here. That should tide you over.
Moreover, I wouldn't be a lawyer if I didn't give you a disclaimer (or use the word "moreover" ): this article contains general information for small business owners and is not tax or legal advice. Always consult an expert who can determine which tax strategies are best for your business and ensure you implement them correctly. If you don't have a relationship with a CPA whom you can count on coming October when you're making your tax projections, now is the time! You'll also want a bookkeeper if you don't have one already. Your bookkeeper will keep your books reconciled and categorized each month, so you'll be ready when October rolls around. Read to the end, and I'll show you how to get advice and counsel suited for you.
And with that, let's get started!
Uncle Sam is practically begging you to save for retirement (unless you want to work until you die, no judgment, you do you). In 2024, you can stuff up to $23,000 into your 401(k) or $30,500 if you're 50 or older. Have you got a SIMPLE IRA? You can contribute up to $16,000, with an extra $3,500 if you're in the half-century club. So, now is an excellent time to increase those contributions if you're off track this year.
Since you're a self-employed business owner, you can supercharge your retirement savings with a SEP IRA or Solo 401(k). These accounts allow you to contribute up to 25% of your net earnings from self-employment, up to a maximum of $69,000. That's right, you could potentially shelter almost 70 grand from taxes - and it's legal.
And don't forget that compound interest is your friend. It's like that buddy who always has your back, except instead of helping you move furniture, it's making your money grow while you sleep. So start maxing out those contributions now.
Remember when your parents said money doesn't grow on trees? Well, it kind of does in the world of Section 179 deductions. You can deduct up to $1,200,000 in 2024 for qualifying equipment, software, or your next new vehicle. That's right, the IRS is essentially saying, "Please, spend money on your business. We insist!"
So, if you've been eyeing that new 3D printer, high-tech coffee maker (hey, productivity is essential), or a fleet of company Sprinter Vans, now's the time to break out the company credit card. Just make sure it's for your business unless you want to explain to an IRS auditor why your "office chair" looks suspiciously like a jet ski.
Additionally, don't forget about bonus depreciation. In 2024, you can deduct 60% of the cost of qualified property in the year you put it in service. These deductions can be a game-changer for your business's tax bill. It's like the government is giving you a "buy now, save later" coupon, except "later" is actually "right now" - well, whenever you file your taxes.
Are you working from home? You can take advantage of the home office deduction as a business owner. It's like finding money in your couch cushions, except the couch is your house!
You've got two options: the simplified or regular methods. The simplified method lets you deduct $5 per square foot, up to 300 square feet. The regular method involves calculating actual expenses, which is perfect for those who enjoy spreadsheets (again, you do you).
Remember, your office needs to be used exclusively for business, meaning a pile of laundry in the corner should probably go.
And here's a little-known secret: if you're self-employed and use your cell phone and internet for business, you can deduct a portion of those expenses, too.
Are you feeling generous? Good news! You can support your favorite causes and save money at the same time. In 2024, you can deduct up to 60% of your adjusted gross income for cash donations. And you can "bunch" your donations. This means concentrating several years' worth of giving into one year to exceed the standard deduction.
But wait, there's more! If you're over 70½, you can make qualified charitable distributions (QCDs) directly from your IRA. These count towards your required minimum distributions but don't increase your taxable income. If you're feeling fancy, consider setting up a donor-advised fund. It's perfect for those who want to be philanthropic but also like to keep their options open. You know, in case you discover a new passion for saving endangered left-handed albino squirrels or something.
While you can't write off that crazy night at the karaoke bar as a business expense anymore (gee, thanks, tax reform), you can still deduct 50% of your business meals. So go ahead, treat your clients to that swanky steakhouse. Don't forget to keep the receipt, though. The IRS expects you to record the amount, date, place, business purpose, and business relationship of the person you dined with.
And if you provide meals to your employees at work for your convenience (like during a late-night crunch session), those are 100% deductible. So, order some pizzas next time your team burns the midnight oil. Your employees will love you, and your tax bill will shrink. It's a win-win!
These five tax strategies should give you enough to chew on until next week, when you'll learn five more moves you can make this year. In the meantime, if you want specific guidance for your business, book a call with me using the link below.
As your trusted LIFTed Business Advisor, I understand the critical importance of strategic tax planning to maximize your small business's financial health. Having support and strategies for implementing these tax moves helps you save money and positions your business for long-term success. That's why I offer a comprehensive LIFT Business Breakthrough Session where we'll analyze your current business foundations - including your tax strategies - and develop a plan to address gaps. We'll ensure your business is well-equipped to take advantage of these tax-saving opportunities. With my support, you can focus on what you do best—growing your business.
Book a Discovery Call to learn more and get started today.
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Austin, TX 78738
