24 Tips: 2024 Year-End Tax Planning Tips for Small Businesses

Feb 14, 2024 | Deductions

Start the new year off right by planning ahead for your taxes in 2024.

If you’re like most business owners, you probably find handling your tax planning to be one of the more overwhelming aspects of entrepreneurship.

So many rules!

So much information that you don’t have time to read up on.

So many opportunities for expensive errors you can’t afford to make.

We get it.

It’s frustrating to work so hard on building your business only to see tax laws change at the drop of a hat, putting you at risk of filing errors, financial penalties, or paying more in taxes than you really should.

But it doesn’t have to be this way! By taking a proactive approach to your taxes from the start of the year, you can alleviate stress, save time, and keep more of your hard-earned money in your pocket.
So, let’s kick off 2024 with a plan in place to tackle your taxes head-on and make this year your most tax-efficient yet!

TSJ: 15+ Years of Tax Advising for Coaches and Consultants

Here at Tax Savvy Jessica we have more than 15 years of experience helping freelance coaches and consultants navigate the confusing world of taxes.

Our goal is to design powerful tax strategies that save you time and money, so you can keep more of your money to build the life you *actually* want.

So here’s to starting off 2024 with tax stress behind you!

Done-For-You Tax Solutions

Tax Savvy Jessica designs turnkey Tax Strategy Plans for 6-figure coaches and consultants who want to pay less in taxes, ditch the numbers stress, and free up more of their money to build their dream life.

 

Ready for done-for-you tax solutions for small businesses?

 

Yes – Do my taxes!

24 Updated Tips to Slash Your Small Business Tax Bill in 2024

Whether you’re new to entrepreneurship or you’ve owned your own coaching and consulting business for years, use these 24 proactive tax planning tips for small businesses to stay ahead of the tax game all year long.

1. Maximize Your Deductions

Sure, you can deduct your office supplies and your work laptop. But did you know you can deduct things like loan interest, insurance, air travel fees, and continuing education?

For a comprehensive list of tax deductions for freelance coaches and consultants, check out our article: Tax Deductions for Freelance Consultants.

2. Defer Taxable Income

Did you know you can delay paying taxes on some forms of income?

By deferring paying taxes until a later date, you can potentially take advantage of lower tax rates in the future. This strategy can also be used simply to lower your tax burden in a particular year, making your tax payment more manageable.

The most common way this strategy is used is by contributing to qualifying retirement accounts such as 401(k)s and IRAs. Taxes on these accounts are typically paid when withdrawals are made in retirement.

3. Accelerate Paying Certain Expenses

Accelerating your expenses for tax purposes is like hitting the fast-forward button on some of your costs to save money on your taxes.

Instead of spreading out deductions over time, you bring forward certain expenses, paying for some things upfront or by using quicker depreciation methods for business assets.

By doing this, you get to shrink your taxable income now, which means less money going to the IRS.

A few deductions that are commonly accelerated for tax purposes include insurance premiums, rent, charitable contributions, subscriptions, and business startup costs.

Keep in mind that these expenses are limited to purchases that can be used within a 12-month period.

So if you prepay an annual subscription to a project management platform you can take the deduction in full. But if you prepay for 3 years, you can only deduct a single year’s value of the expense.

4. Recognizing Losses

Business decisions don’t always work out the way you envision, which is why we’re glad that recognizing losses for tax purposes is a way to lower your tax burden.

Recognizing a loss happens when you sell something for less than you paid for it – think business property or assets like office equipment or vehicles–and you write off the amount of money “lost” in the transaction.

Although losing money on a transaction isn’t great, you can use your loss to offset other financial gains, lowering your overall tax bill.

Losses for personal property are not deductible

5. Home Office Upgrades

Look, we get it. Having a tax pro tell you that you just have to upgrade your home office to lower your taxes is terrible. (Can you hear our sarcasm through your computer?)

But really…

Have you been dying to trade in your crappy Office Depot chair for the Herman Miller Aeron you’ve been lusting after for years?

Consider this sentence your stamp of approval. Just don’t forget to log and categorize your receipts.

6. Tech Upgrades

If you’re ready to buy your next laptop, printer, or that new project management software you’re dreaming about, do it!

As long as the new equipment is both ordinary and necessary, it should be tax deductible.

7. Vehicle Write-Offs and Upgrades

Do you sometimes use your vehicle for business purposes? If so, you can deduct a percentage of your vehicle ownership and maintenance.

If your vehicle is used 100% for your business, you can deduct the entire cost of ownership and maintenance.

Cost of ownership and maintenance can include things like vehicle depreciation, gas, oil changes and other maintenance, repairs, insurance, registration fees, lease payments, loan interest, and tolls.

Just remember that a mileage log is required to take any vehicle deductions for your business.

8. Take Advantage of Accelerated Depreciation

Some business purchases can qualify for accelerated depreciation, such as bonus depreciation and Section 179.

Here’s how it works: instead of spreading out depreciation deductions over several years, accelerated depreciation lets you claim a large expense on your taxes in the same year you make the purchase.

Say you buy a new Macbook for your business. You could claim depreciation of the computer over the course of its “useful life” as defined by the IRS. Or you could write-off 100% of your purchase in a single tax year, keeping more hard-earned money in your business.

Current bonus depreciation is limited to 60% for the 2024 tax year, but this could revert to 100% should the Taxpayer Relief for American Families and Workers Act of 2024 be signed into law.

Section 179 allows qualifying property to be depreciated up to 100% in its first-year of service subject to some exceptions.

9. Revisit Your Retirement Plan

Even if you’re already investing in tax-advantaged retirement accounts, revisiting your strategy from time-to-time can ensure you’re gaining the maximum benefit.
Here are some retirement plan options that may help you save on business taxes:

  • Solo 401(k) or Self-Employed 401(k): Designed for self-employed people without employees, these retirement accounts allow tax-deductible contributions with high contribution limits. For more information on 2024 options, visit the IRS website article: One Participant 401(k) Plans.
  • Traditional IRA: Although not a direct method for saving on business taxes, traditional IRA contributions are tax deductible from your personal income tax in the year you make them.
  • Roth IRA: Self-employed business owners can contribute to an IRA up to a certain amount depending on their income levels.
  • Health Savings Account (HSA): While not a traditional retirement plan, contributing to an HSA can provide tax advantages. Contributions are tax-deductible, grow tax-free, and withdrawals for qualified medical expenses are tax-free.

Before choosing a retirement plan, consider consulting with a financial advisor or tax professional to determine which plan aligns best with your business goals and financial situation.

10. Establish Benefit Plans for Your Employees

Want to attract and retain great employees while also lowering your overall tax burden?

Offer benefit plans!

Here are some of the common employee benefit plans offered by some small businesses:

  • Health insurance: While not a direct tax deduction, some small businesses may qualify for a tax credit for offering health insurance to employees.
  • Life insurance: Some employer-sponsored life insurance plans can be tax-deductible.
  • Retirement plans: Employer contributions to a traditional 401(k) are tax-deductible for the business. Additionally, contributions to a Simple IRA or SEP IRA are tax-deductible for the employer.
  • Commuter benefits: Providing commuter benefits, such as parking passes or public transit reimbursement can be tax-deductible to your business.

11. Donate Appreciated Property

Donating appreciated property to a qualified charity can lower your business’s tax bill. Here’s how it works:

When assets, like stock, are donated to a qualified charity, the deduction is equal to the current fair market value of the property, not what you paid for it.

So you could have a $10 stock you purchased worth $1,000 today that would give you a $1,000 deduction vs the $10 you originally spent on it.

Just make sure you keep meticulous records of any donations you make and that you’re aware of available deduction limitations in a tax year.

12. File Your End-Of-Year Tax Forms

Although your actual business tax forms aren’t required to be filed until the tax deadline in April, some relevant forms should be filed by the end of the year for optimal tax savings.

The specific forms filed will depend on your business structure and whether or not you have employees, but here are some of the most common ones filed by coaches and consultants:

Form W-2: If your business has employees, you need to provide them with Form W-2, reporting their wages, tips, and other compensation, as well as taxes withheld.

Form 1040 Schedule C: Sole proprietors and single-member LLCs typically use this form to report business income and expenses. It’s attached to the owner’s personal income tax return (Form 1040).

Form 1099-MISC: If your business paid $600 or more to a contractor, freelancer, or other non-employee during the year, you need to issue them a Form 1099-MISC to report the payments.

Form 941: Also known as quarterly tax payments, small business owners must file Form 941 quarterly to report and pay estimated income taxes, Social Security tax, and Medicare tax.

End-of-year financial statements, including the balance sheet and income statement, provide valuable insights into the financial health of your business. This information is essential for financial planning, budgeting, and making informed business decisions as you transition to a new year.

13. Make Sure Your Business Structure Still Makes Sense

Many small coaching and consulting businesses are initially formed as single-member LLC’s. But as your business grows, it can sometimes be financially beneficial to recategorize your business structure, most likely to an LLC electing S-Corp status.

S-Corp status doesn’t change your core business structure. Rather, it changes the way your business is taxed by allowing “pass-through” taxation in which income “flows through” the business to be taxed on the individual level.

This taxation method avoids double taxation, a situation in which a business is taxed on its overall income, then income passed on to shareholders is taxed at the individual level as well.

14. Split Business Income With Family Members

This strategy involves redistributing income from a higher earning family member to another person who is in a lower tax bracket. The idea is to “offload” income to your lower-earning family members who are in a lower tax bracket while lowering your own tax burden at the same time.

This person could be your spouse, your child, or extended family members.

However, tax laws vary, so the specifics of using this strategy, if it’s an option, will depend on your tax jurisdiction. (Another reason we always recommend working with a qualified tax professional!)

15. Research Tax Credits

Explore available tax credits that your business may be eligible for. Tax credits directly reduce your tax liability, providing a dollar-for-dollar reduction in taxes owed.
Look into credits for various purposes such as research and development, health care, energy efficiency (see below), or startup costs.
Researching and utilizing these credits can significantly lower your overall tax bill.

16. Take Advantage of Energy Efficiency Credits

If you run your coaching or consulting business from home, making energy efficient upgrades to your space can make you eligible for tax credits.
The credit for eligible clean energy expenses is as follows:

  • Business use up to 20%: full credit
  • Business use more than 20%: credit based on share of expenses allocable to nonbusiness use

For more information, read the IRS page about the Energy Efficient Home Improvement Credit.

17. Invest in Professional Development

Did you know investing in professional development can have tax benefits for your business?

You can deduct the costs of continuing your education, including tuition, books, and any other required materials, as business expenses.

So if you’ve been thinking about enrolling in a course or going back to school, keep in mind that your investment can have both personal and financial benefits.

18. Claim Business Loan Interest

Generally speaking, interest paid on business loans is a tax deductible business expense.

To qualify, the loan must be used for business purposes alone.

You should also keep detailed records showing how the loan funds are used within your business.

19. Review Your Accounting Method

Make sure you’re using the best accounting method for your business.

Businesses can use either the cash or accrual accounting method. The cash method records transactions when cash enters or leaves the business.

The accrual method means revenue is recognized when it is earned, regardless of when payment is received. This means sales are recorded when products or services are delivered, not necessarily when cash is received.

While the cash accounting method is more simple and straightforward, the accrual method give a more accurate picture of your business’s financial health.

To determine which method is best for your unique situation, we recommend working with a tax and accounting professional.

20. Plan to Attend a Trade Show

Attending trade shows that are relevant to your business is a good way to increase your tax deductions.

Your travel to and from the show, lodging, meals, local transportation, and cost of admission are eligible expenses.

Just make sure you’re spending the majority of your time at the show engaged in business activities. If your trade show is in New York City and you spend most of your time museum hopping and checking out the food scene, you probably shouldn’t try to write-off your trip.

21. Send Holiday & Thank You Gifts to Your Clients

Show your star clients some love and claim another deductible with a holiday gift. The current IRS limit is $25 per client.
While some people see this as super low (it is because it hasn’t been adjusted since the 1940s and would be equal to $2,500 today!) you can still send small gifts that will thrill your clients nonetheless.

Not sure what to send?

At Tax Savvy Jessica, we like to make use of the year-end Bath and Body Works sales to purchase candles, soaps, and other small items to gift to our clients.

The price stays within the required range and clients love it!

22. Utilize the Qualified Business Income (QBI) Deduction

The QBI deduction lets certain small businesses slash their tax bill by up to 20% of their qualified business income.

To qualify, your taxable income earned from your small business can’t exceed certain threshold amounts ($191,950 for single filers and $383,900 for married filers in 2024). But even if you’re above those income thresholds, you might still qualify for a partial deduction, depending on factors like wages
paid by your business and the value of your business assets.

By taking advantage of the QBI deduction, eligible small business owners can reduce their taxable income and lower their overall tax liability.

23. Prepay Your Tax Prep

Did you know you can pay for next year’s tax preparation now?

You’ll get a business deduction and we’ll have the pleasure of working with you and your business for another year!

24. Hire a Tax Professional

Fees spent on professionals like accountants, lawyers, consultants, and tax strategists (like yours truly!) are considered ordinary and necessary by the IRS. You can reduce your taxable business income by claiming these deductions on your business taxes.


Want Expert Help? Let Tax-Savvy Jessica Take the Wheel.

Here at TSJ we love a good list of tax planning strategies. But what do we love even more?

Getting the chance to rock our clients’ worlds with tailor-made tax strategies and services, alleviating overwhelm and rekindling the joy in running their businesses!

Tax Savvy Jessica has 15+ years of experience helping her clients navigate complicated tax rules like these.

Let us handle the taxes so you can run your business in peace.

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Hi, I’m Jessica.

I’m the passionate tax-pert behind Tax Savvy Jessica. I spent more than 10 years performing audits for the IRS. My experience there taught me how to understand taxes from the perspectives of both taxpayers and the IRS.

I started Tax Savvy Jessica because I’m passionate about helping small business owners understand their taxes so they can use their money to build the life they want.

Free up more money to build the life you really want.

Take our Fit & Pricing Quiz to find the package that fits your needs.

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