2024 Year-End Tax Planning – Businesses

With one month remaining in 2024, it’s crucial for business owners to assess the tax implications of their operations throughout the year. They should consult their tax advisors to review the outcomes of 2024 and determine whether any of the year-end planning options listed below could be advantageous for them.

Choice of Entity

Discover how obtaining pass-through entity status can help reduce your tax liabilities. If you’re filing Schedule C, it’s wise to consult a tax professional to evaluate the pros and cons of choosing S corporation status. If you are launching a new venture with a partner, consider whether the business structure should be a partnership, S corporation, or C corporation.

Accounting Records/ Bookkeeping

Review your accounting records and bookkeeping to ensure that all revenues and costs are properly documented. Consider asking yourself the following questions:

• Did any business-related expenses get incorrectly categorized as personal expenses? 
• Are there any home office costs that should be included in the final totals?
• Are the payroll figures accurate?

Scheduling of income and Expenses

• If you’ve experienced an exceptional year and anticipate high profits this year, think about the possibility of postponing revenue recognition to the next year (depending on the timing of your cash receipts) and boosting this year’s expenses by prepaying certain costs for the upcoming year.
• If you anticipate lower profits this year, consider speeding up cash collection before December 31, if you can, and postponing expense payments until the following year, if it is feasible

Depreciation

If you purchase either new or used equipment for your business and put it into operation by December 31, 2024, you may have the option to expense that purchase and receive a federal income tax deduction for the 2024 tax year under IRC Section 179. Currently, this benefit is expected to continue in subsequent years, with adjustments for inflation.

Bonus Depreciation

Also, bonus depreciation, which was set at 100% during the pandemic in 2020, will be 60% of the cost basis for property that is placed in service in 2024. Therefore, if you’re contemplating the purchase of new equipment, it might be wise to consider making that purchase now and ensuring it is operational before the year’s end to take advantage of the 60%.

Retirement Plans

Think about contributing to an employer-sponsored retirement savings plan like a SIMPLE IRA, SEP IRA, 401(k), or profit-sharing plan. These options not only assist you in saving for the future but also offer valuable tax benefits for both you and your employees. The contributions made for yourself, and your staff could be tax-deductible, thereby reducing your taxable income; however, keep in mind that there are specific limits and restrictions.

Gifting

As the expiration of the current elevated gift and estate tax exemptions under the Tax Cuts and Jobs Act of 2017 approaches, be aware that these exemptions are scheduled to revert to the 2017 baseline of $5 million for individuals and $10 million for couples (adjusted for inflation) after December 31, 2025. It may be prudent to assess how to allocate some of your wealth to your beneficiaries before these higher limits expire.

In a constantly evolving tax environment, partnering with a reliable advisor for tax planning is essential. We will remain vigilant regarding future developments and ensure you stay updated on the latest changes in tax law.

Questions?

As always, should you have questions on this or other matters affecting you or your business, please call or email us to speak with a CPA today.

DISCLAIMER: The WM Update, WM Wednesday Wisdom, WM Daily Update, and other related communications are intended to provide general information, as of the date of this communication, and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.