Year-End Tax Planning Tips for 2024

The best thing you can do is think about taxes before the year ends. Most individuals wait until the tax filing deadline before asking how they can reduce their income taxes. Unfortunately, once 2024 ends, there’s little you can do to decrease your taxes for the year.

To start your tax planning, you should review your income, deductions, and withholdings before the year ends. This means you need to get your bookkeeping up to date! Use software applications like QuickBooks, Quicken Home and Business, or spreadsheets to track your income and expenses for your business.

When your bookkeeping is up to date, consider whether your business will have a profit or a loss this year. Here are some tax planning tips to help minimize your home-based business taxes for 2024:

If You Expect a Profit:

1. Defer Income:

   • If your business is profitable this year, consider invoicing your clients in January instead of December to defer the income to next year. Any money received in January will go on your 2025 tax return, not 2024.

2. Increase Expenses:

   • Do you need to purchase inventory or supplies? Does your computer need replacement? If you have a profit for 2024, consider buying these items this year to reduce your taxable profit.
   • Pay all mortgage payments, property taxes, medical expenses, etc., this year to maximize your tax deductions if you itemize.

3. Maximize Retirement Contributions:

   • As a home-based business owner, you have several retirement plans to choose from, such as a traditional IRA, SEP IRA, SIMPLE IRA, or a solo 401(k). Contribution limits vary, but these plans allow contributions from $6,000 up to $66,000 annually. Contributing to a retirement plan is a great way to boost your retirement savings and reduce your taxes simultaneously.

4. Charitable Contributions:

   • Charitable donations reduce your taxable income if you itemize your deductions. Gifts of money or items are a great way to lower your tax bill this year.

If You Expect a Loss or Higher Income Next Year:

• Accelerate Income:
  • If you anticipate higher income next year or expect to move into a higher tax bracket, it might be beneficial to report as much income as possible this year and defer expenses until next year.

Either way, year-end tax planning can significantly help reduce your taxes. Make it a point to review your taxes before the year ends. Once 2024 is over, so are your tax planning opportunities for this year.

Contact Us Today:

Don’t wait until the last minute. Get your bookkeeping in order and start your year-end tax planning now. Contact us for professional bookkeeping services and expert tax planning advice to help you maximize your deductions and minimize your tax liability for 2024.

Contact us for more details and take control of your finances before the year ends!