Category: Year-End Tax Planning

As the year draws to a close, it’s time to maximize your current year’s tax deductions and other tax planning opportunities. Here’s a brief checklist of moves you can make to help reduce current or future tax exposure.

BUSINESS EXPENSES

You may be able to reduce your 2024 tax bill by pre-paying certain business expenses before the year’s end. For example, you can renew subscriptions, pay ahead for advertising, business insurance premiums, rent, business licenses, and other items that don’t extend more than 12 months.

EQUIPMENT

Repair broken equipment and physical plant items by the end of the year. Buy business equipment and put it into service by year’s end. Your business can deduct the entire cost of qualified equipment up to a purchase limit of $1,220,000 for tax year 2024.

MAXIMIZE QBI DEDUCTIONS

If you meet certain income limits, owners of S corporations, partnerships, and sole proprietorships may deduct up to 20% of qualified business income (QBI).

For tax year 2024, eligibility for the deduction begins to phase out at income levels of $191,950 for single filers and $383,900 for joint filers.

If you’re over the income threshold, consider finding some more deductions.

Ideally, you have strived to minimize your taxes all year. Good news! Here are some year-end strategies that may help cut your tax bill even more. Before implementing these or any year-end strategies, talk with your tax advisor.

DEFER OR ACCELERATE INCOME

Project whether you’ll have higher taxable income in 2024 or 2025. If it’s 2025, consider receiving any potential bonus, investment and other supplemental income this year.

Do the opposite if, for example, you’ll have fewer dependents to deduct next year, have a spouse taking leave, suffer business losses, etc., resulting in having less taxable income in 2025.

BUNCH DEDUCTIONS

For instance, if medical expenses for 2024 year exceed the deductible minimum threshold of 7.5% of adjusted gross income (AGI), squeeze in medical expenses planned for 2025 to maximize tax 2024 savings.

Before bunching any expenses into 2024, consider your overall tax bracket for this tax year and 2025. If you anticipate income increasing enough in 2025 to put you in a higher bracket, it may make sense to postpone a deduction.

TOP OFF YOUR CONTRIBUTIONS

You have until the April 15, 2025, tax filing deadline to make Health Savings Account (HSA) contributions for this year. If you have not already maximized your contribution, do so. Contributions and earnings are generally excluded from taxable income.