December 4, 2024

For business owners, year-end tax planning is an opportunity to maximize deductions, manage income, and position your business for financial success in 2025. Whether you’re a sole proprietor, partnership, or corporation, these strategies can help reduce your tax burden while keeping your business financially healthy. 

 

1. Accelerate Deductions or Defer Income 

Cash Method Accounting: If you’re on the cash method, consider delaying income into 2025 or accelerating deductible expenses into 2024. For example: 

• Prepay expenses like rent or utilities. 
• Delay invoicing until January. 

 

2. Maximize Depreciation Deductions 

Bonus Depreciation: Deduct 60% of the cost of qualifying assets (e.g., equipment, vehicles) placed in service by December 31, 2024. Vehicles used for business have specific caps: 

• $20,400 first-year cap for cars and SUVs. 
• Heavy SUVs and pickup trucks used 100% for business can be fully expensed. 
• Section 179 Expensing: Deduct up to $1,220,000 for eligible assets, such as machinery or technology, subject to taxable income limits. 

 

3. Take Advantage of the Qualified Business Income (QBI) Deduction 

Pass-through entities (e.g., S corps, LLCs) can deduct 20% of qualified business income. If your taxable income is near the limits ($383,900 for joint filers; $191,950 for others), consider accelerating expenses or deferring income to stay under the threshold. 

 

4. Plan Retirement Contributions 

Employee Plans: Contributing to employee retirement plans, like a 401(k), can reduce your taxable income while boosting employee satisfaction. 

 

Self-Employed Plans: Consider funding a SEP IRA or solo 401(k) if you’re self-employed. Contributions can be made up until the extended filing deadline for 2024 returns. 

 

5. Invest in Energy-Efficient Upgrades 

Take advantage of a 30% credit for installing solar energy systems or other renewable energy solutions at your business location. Smaller energy-saving improvements may qualify for a $1,200 annual credit cap. 

 

6. Review Your Inventory and Write Off Obsolete Stock 

If your business carries inventory, evaluate it before year-end. Writing off obsolete or unsellable inventory can provide a tax deduction. 

 

7. Prepare for 2025 and Beyond 

R&D Tax Credit: If your business invests in research and development, claim the R&D tax credit for eligible activities. 

 

Estate and Succession Planning: For family-owned businesses, review your succession plan to take advantage of current lifetime estate tax exemptions, which are set to decrease after 2025. 

 

8. Don’t Forget Employee Benefits 

Consider offering fringe benefits like health insurance or education assistance. These can provide tax advantages for your business while attracting and retaining talent. 

 

9. Review Tax Payments 

Ensure you’ve met your estimated tax obligations to avoid penalties. If necessary, adjust withholding or make a final estimated tax payment before year-end. 

 

With just weeks left in the year, now is the time to act. Proactive planning can save your business money and set it up for success in 2025. Consult your tax advisor to tailor these strategies to your unique needs.