As a small business owner, you know that managing your finances strategically is crucial to your success. With the second half of 2024 underway, now is a great time to focus on the thing no one likes to talk about but can make a huge difference to your bottom line: taxes.
I know it’s not even close to tax season, but hear me out. Strategic tax planning affects your bottom line by helping you maximize deductions and minimize your tax liability. So, thinking about these strategies now gives you plenty of time to take action rather than scrambling in December (or worse, next March) when it may be too late. Trust me, your future self will thank you.
This article contains general information for small business owners and is not tax or legal advice, always consult an expert who can determine which tax strategies are best for your business and ensure you implement them correctly. In fact, if you don’t have a relationship with a CPA whom you can count on come October when you’re making your tax projections, now is the time! You’ll also want a bookkeeper if you don’t have one already. Your bookkeeper will keep your books reconciled and categorized each month, so you’ll be ready when October rolls around.
Move #1: Supercharge Your Retirement Accounts
Uncle Sam is practically begging you to save for retirement. In 2024, you can stuff up to $23,000 into your 401(l), or $30,500 if you’re 50 or older. Got a SIMPLE IRA? You can contribute up to $16,000 with an extra $3,500 if you’re in the half-century club. So now is a good time to increase those contributions if you’re off track this year.
Since you’re a self-employed business owner, you can supercharge your retirement savings with a SEP IRA or Solo 401(k). These accounts allow you to contribute up to 25% of your net earnings from self-employment, up to a maximum of $69,000. Yep, you could potentially shelter almost 70k from taxes-and it’s totally legal.
And don’t forget that compound interest is your friend. It’s like that buddy who always has your back, except instead of helping you move furniture, it’s making your money grow while you sleep. So, start maxing out those contributions now.
Move #2: Shop ‘Til You Drop
Remember when your parents said money doesn’t grow on trees? Well, in the world of Section 179 deductions, it kind of does. You can deduct up to $1,200,000 in 2024 for qualifying equipment, software, or your next new vehicle. That’s right, the IRS is essentially saying, “Please, spend money on your business. We insist!” Now is the time to break out the company credit card. Just make sure it’s actually for your business unless you want to explain to an IRS auditor why your “office chair” looks suspiciously like a jet ski.
Additionally, don’t forget about bonus depreciation. In 2024, you can deduct 60% of the cost of qualified property in the year you put it in service. These deductions can be a game-changer for your business’s tax bill.
Move #3: Turn Your Home Office Into a Tax Haven
Working from home? As a business owner, you get to take advantage of the home office deduction. It’s like finding money in your couch cushions, except the couch is your house!
You have 2 options here: the simplified method or the regular method. The simplified method lets you deduct $5 per square foot, up to 300 square feet. The regular method involves calculating actual expenses, which is perfect for those who enjoy spreadsheets.
Just remember, your office needs to be used exclusively for business, which means that the pile of laundry in the corner should probably go.
And here’s a little-known secret: if you’re self-employed and use your cellphone and internet for business, you can deduct a portion of those expenses too.
Move #4: Become a Charitable Giving Ninja
Feeling generous? Good news! You can support your favorite causes and save money at the same time. In 2024, you can generally deduct up to 60% of your adjusted gross income for cash donations. And you can “bunch” your donations. This means concentrating several years’ worth of giving into one year to exceed the standard deduction.
But wait, there’s more! If you’re over 70 ½, you can make qualified charitable distributions (QCDs) directly from your IRA. These count towards your required minimum distributions but don’t increase your taxable income. If you’re feeling really fancy, consider setting up a donor-advised fund. It’s perfect for those who want to be philanthropic but also like to keep their options open.
Move #5: Wine and Dine for Uncle Sam
While you can’t write off that crazy night at the karaoke bar as a business expense anymore, you can still deduct 50% of your business meals. So go ahead, treat your clients to that swanky steakhouse. Don’t forget to keep the receipt though, the IRS expects you to record the amount, date, place, business purpose and business relationship of the person you dined with.
And if you provide meals to your employees at work for your convenience (like during a late-night crunch session) those are 100% deductible.
These 5 tax strategies should give you enough to chew on until next week when you’ll learn 5 more ways you can make this year. In the meantime, if you’re looking to get specific guidance for your business, book a call with me here.
As your trusted LIFTed Business Advisor, I understand the critical importance of strategic tax planning to maximize your small business’s financial health. Having support and strategies for implementing these tax moves not only helps you save money but also positions your business for long-term success. That’s why I offer a comprehensive LIFT Business Breakthrough Session where we’ll analyze your current business foundations- including your tax strategies- and develop a plan to address any gaps. Together, we’ll ensure that your business is well-equipped to take advantage of these tax-saving opportunities. With my support you can focus on what you do best—growing your business.
Book a call here to learn more and get started today.