2024 Last-Minute Year-End Tax Deduction Strategies
With year-end approaching, it’s the perfect time to explore ways to reduce your 2024 business taxes. At Private Tax Solutions, we’re here to help you maximize your deductions with these six effective strategies tailored to your business’s needs. Implementing these tips before the year ends can make a significant impact on your tax savings.
1. Prepay Expenses Using the IRS Safe Harbor
Take advantage of the IRS safe-harbor rule, which lets cash-basis taxpayers prepay and deduct certain expenses up to 12 months in advance. These include costs like rent, equipment leases, and insurance premiums. For example, if you pay $2,000 in monthly rent, you can prepay for 2025 this December, securing a $24,000 deduction in 2024.
Key Tip: To ensure compliance, mail your payment with USPS tracking to prove payment timing if the IRS requests it. Our team can help you make sure these payments meet safe-harbor guidelines.
2. Delay Customer and Client Billing
Deferring income by postponing billing until after December 31, 2024, can lower your taxable income. This can be a simple yet effective tactic for cash-basis taxpayers.
Example: If you usually bill customers or clients weekly, delay December invoices until January 1, 2025, to reduce your 2024 income. Private Tax Solutions can guide you on the timing and documentation needed to keep your records IRS-ready.
3. Invest in Office Equipment Before Year-End
Purchasing qualifying equipment before December 31 lets you claim a deduction through Section 179 or bonus depreciation. Items such as office furniture, computers, and machinery are eligible.
- Section 179 allows for a full write-off in the year of purchase.
- Bonus depreciation lets you deduct 60% of the cost, with additional deductions available under MACRS.
Tip: Work with us to ensure that these purchases meet IRS requirements and are fully documented.
4. Use Credit Cards for Year-End Purchases
The date you charge a purchase to your business credit card is the date of deduction. This applies to sole proprietors and single-member LLCs filing as individuals, as well as corporations with a business credit card. Make last-minute purchases of office supplies, software, or equipment by December 31 to maximize deductions.
Reminder: For corporations using a personal credit card, submit your expense report and have the corporation reimburse you by year-end to secure deductions.
5. Claim All Valid Deductions, Even if They Create a Loss
At Private Tax Solutions, we often see new business owners avoid deductions, fearing they may raise red flags or result in a loss. However, tax law allows “net operating losses” (NOLs), which can be carried forward to offset future profits. This can provide a valuable cash flow benefit, reducing future tax bills.
Our Take: Claim every eligible deduction. If a deduction is valid and well-documented, it can withstand IRS scrutiny.
6. Deduct Qualified Improvement Property (QIP) for Commercial Real Estate
If you’ve upgraded the interior of a commercial property, you may qualify for deductions through Section 179, bonus depreciation, or MACRS. Qualifying improvements include new lighting, plumbing, or HVAC systems for retail or office spaces. These upgrades can be deductible in 2024, provided they’re in use by December 31.
Pro Tip: To ensure your QIP meets requirements, consult with Private Tax Solutions for tailored guidance on your commercial property improvements.
Summary
Year-end tax strategies can make a big difference. Here’s a quick recap of the best moves to make before December 31:
- Prepay expenses to secure immediate deductions.
- Delay billing to defer income.
- Invest in equipment that qualifies for Section 179 or bonus depreciation.
- Use credit cards strategically for business expenses.
- Claim all valid deductions, even if it results in a loss.
- Deduct qualified improvements on commercial property.
Our team at Private Tax Solutions specializes in helping small business owners implement tax-saving strategies. Get in touch to review these tactics and ensure you’re maximizing your 2024 deductions.
