A business owner's guide to year-end tax planning

Tax mitigation strategies can help the bottom line.

While these are by no means exhaustive, these tax ideas can be a great starting point for year-end planning. With a complex and ever-changing tax code, it’s a good idea to schedule a meeting with your financial advisor and tax professional as well.

Buy new equipment? Take a deduction

Investing in your business by buying new equipment is one of the most straightforward ways to take a deduction. Section 179 of the IRS tax code allows you to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year from gross income. What items fall under this category for you? Don’t forget potential depreciation after your spending cap is reached.

Defer income and accelerate deductions

Send your invoices out a few days later in December to delay receiving payment until January. Or, prepay some bills that are due in January to take the deduction for this tax year. A little foresight in this category can add up to big tax savings.

Redesign your company retirement plan

Talk to your advisor about options for your company retirement plan – you may have had changes in employee demographics, income to your business or new highly compensated employees. Sitting down and looking over your current plans together may reveal different options to choose from, including SIMPLE IRAs, profit-sharing and Safe Harbor 401(k)s. A qualified plan offers a deduction for your contributions, and you defer tax on earnings on contributions.

Find the silver lining of a net operating loss

With business losses that exceed your income for the year, the excess can actually lower your income and cut your tax bill in another year. These rules were adjusted by the Tax Cuts and Jobs Act of 2017 and have been temporarily changed again by the 2020 CARES Act. Consult your tax professional here as the ins and outs can be complex.

Deduct vehicle expenses

When you use your vehicle to visit clients or attend business meetings away from your office, don’t forget to deduct these expenses. You can take either the standard mileage reimbursement rate for 2024 or calculate your actual expenses.

One example: if you drive your car 20,000 miles per year and 10,000 of those miles are for business, you can claim 50% of expenses, such as gas, tires, repairs, insurance, license and registration fees, and depreciation. But you can’t use the expense method if you’re leasing a vehicle and previously used standard mileage. Vehicle deductions can go for multiple cars. Make sure you keep an accurate mileage log and receipts.

There are many other deductions you can take for your business – talking with your tax professional may uncover others. The key is a little planning ahead of time, to realize any benefits you might be entitled to.

Raymond James does not provide tax services. Please discuss these matters with the appropriate professional.