We have some ideas for you.
With tax season just behind us, it’s a good time to reflect. If you had a good year in 2023, Uncle Sam may seem to have celebrated a little too much at your expense. That new tax bill can bring some sticker shock along with it.
So, before you go back to business as usual, this might be a great time to review your tax strategies. Having worked closely with many CPAs over the years combined with our experience managing the books for many companies, large and small, we have a few thoughts on the areas you might want to look at.
Accelerate Expenses and Defer Income. If you are expecting a high revenue year in 2024, this may be a great time to look at larger purchases and putting more of your money into the company before the end of the year. Also, look at your billing and consider timing what would be typically end of the year invoices into the first quarter of 2025. That will also defer any taxes on that income until the following year.
Review Tax Deductions and Tax Credits. Your tax professional can help you review your current deductions and identify any additional ones you may qualify for. If you are what is called a “pass through” business such as a sole proprietorship, single-member LLC, or an S corporation, you may be eligible for the qualified business income deduction which allows you to deduct up to 20% of your qualified business income on your taxes, subject to certain income limitations. Additionally, there are tax credits you may qualify for that you’re missing out on.
Don’t Forget Depreciation. Typically, depreciation is taken over years, but there is a provision in federal law that could give you up to an 80% first-year deduction for certain types of equipment and improvements up to a specified dollar amount ($1 million in 2023).
If You Have Employees, Consider Offering Fringe Benefits. Higher wages mean higher employment taxes for you and higher taxes for your employees. One way to address that is to provide tax-exempt fringe benefits such as group life insurance, transportation reimbursement, and employee-focused enhancements in the workplace such as providing meals.
A little advance planning now can save you big at tax time. Setting up a time to talk with your CPA is a good first step. To learn more about the comprehensive financial services we can offer you, let’s talk.