*Updated 11/26/24

The end of the year is quickly approaching, and now is the perfect time to take control of your taxes.

Regardless of whether your business had an outstanding year, encountered unforeseen challenges, or is just starting out, there is still time to implement strategic moves that could significantly reduce your tax bill for 2024.

Ready to explore actionable strategies to reduce your tax liability? Let’s dive into nine certified tips that can help you close out 2024 on a strong financial note.

Defer Income—When It Makes Sense

Deferring income can push taxable revenue into 2025, giving you more flexibility in managing your tax burden. However, this strategy depends on your current and future tax bracket.

• If your tax bracket is likely to increase in 2025, you may want to accelerate income into 2024 to take advantage of the lower rate.
• If your tax bracket will stay the same or decrease, deferring income makes sense.

Pro Tips for Deferring Income:

• If you’re self-employed, delay sending invoices or billing clients until late December so payments arrive in January 2025.
• If you’re an employee, see if your employer can defer your year-end bonus to January.

Example:
If your business faced significant losses earlier in the year but bounced back, keeping income in 2024 could offset those losses and reduce your overall tax burden.

Accelerate Expenses to Maximize Deductions

For businesses taxed on a cash basis, paying expenses early can increase deductions for 2024. Any payments made before December 31st count, even if the check clears in 2025.

Expense Acceleration Ideas:

• Prepay utility or phone bills due in early January.
• Stock up on office supplies or other necessary materials.
• Pay employee bonuses before year-end.

Example:
Paying a $500 utility bill dated January 10, 2025, on December 31, 2024, lets you deduct it from your 2024 taxes.

Harvest Tax Losses to Offset Gains

Did some of your investments take a downturn this year? Tax-loss harvesting lets you use those losses to offset capital gains or up to $3,000 of other income.

How It Works:

• Sell underperforming stocks, bonds, or mutual funds to realize the loss.
• Use those losses to offset any capital gains from profitable investments.

Example:
If you have $10,000 in capital gains and sell investments with $5,000 in losses, your taxable gains drop to $5,000—saving you money.

Bonus Tip: If you believe the sold investment will rebound, wait 30 days before buying it back to avoid the IRS “wash sale” rule.

Maximize Retirement Contributions

Retirement accounts like 401(k)s and IRAs offer significant tax advantages. Contributions are either tax-deferred or made tax-free (Roth accounts).

2024 Contribution Limits:

• 401(k): Up to $23,000 (or $30,500 if you’re 50+).
• IRA: Up to $7,000 (or $8,00 if you’re 50+).

If you have an employer match, aim to contribute at least enough to take full advantage of it—it’s free money! Contributions to a traditional IRA for 2024 can be made until April 15, 2025.

Use Homeownership to Your Advantage

Homeownership brings several tax benefits, including deductions for mortgage interest and property taxes.

Tips for Maximizing Deductions:

• Make your January mortgage payment by December 31st to claim the interest for 2024.
• Pay your second real estate tax installment early to include it in this year’s deductions.

Ensure all payments are processed before December 31st and reflected in your lender’s Form 1098 statement.

Pay College Costs Early

If you qualify for education-related tax credits, paying college expenses before year-end can boost your 2024 deductions.

Key Education Tax Credits:

• American Opportunity Tax Credit: Up to $2,500 per student for qualified expenses, like tuition and fees.
• Lifetime Learning Credit: Up to $2,000 for education expenses with no limit on eligible years.

Eligibility:

Credits are subject to income limits, so consult your tax advisor to confirm eligibility.

Check Your Withholding

Review your year-to-date withholding to avoid surprises in April. Adjusting now can prevent underpayment penalties or reduce large refunds.

How to Adjust:

• Use the IRS Tax Withholding Estimator to check your projected tax liability.
• Submit an updated W-4 to your employer if needed.

Tip: Aim to balance your withholding so you neither owe a significant amount nor receive a large refund.

Don’t Overlook Estimated Tax Payments

If you make estimated tax payments, ensure your fourth-quarter payment is submitted by January 15, 2025. For state taxes, consider paying by December 31st to maximize your deductions if you haven’t hit the $10,000 SALT limit.

Reinvest in Your Business

If your business is profitable, reinvesting in equipment, technology, or other assets before year-end can provide significant deductions.

Section 179 Deduction:

• Deduct the full purchase price of qualifying assets up to $1,220,000 for 2024.

Example:
If you buy a $50,000 vehicle for your business in December, you may deduct the full amount—reducing your taxable income by $50,000.

Play the Standard vs. Itemized Deduction Game

The high standard deduction ($13,850 for single filers and $27,700 for married couples in 2024) makes itemizing challenging. However, bunching deductions can make itemizing worthwhile in alternate years.

Example:
Pay medical bills, make charitable contributions, and prepay property taxes in one year to exceed the standard deduction. The next year, take the standard deduction.

Take Action Now

Time is running out to implement these strategies and reduce your 2024 tax liability. Before the holiday rush takes over, set aside time to review your situation and take action.

How great would it feel to lower your tax burden and enter 2025 financially prepared? You’ve got this!

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