Unlock Your Tax Savings: 6 Business Tax Strategies for Year-End 2024

As the year draws to a close, it's the perfect time to take advantage of some savvy tax strategies. By understanding and implementing these six powerful techniques, you can significantly reduce your tax burden and potentially even receive a refund.

1. Prepay Expenses: A Timely Tax Move

The IRS offers a convenient "safe harbor" rule that allows you to prepay certain expenses up to 12 months in advance and claim the deduction in the current year. This strategic move can provide substantial tax savings.

Qualifying Expenses:

• Lease payments for business vehicles

• Rent for office spaces and machinery

• Business and malpractice insurance premiums

Example: By prepaying a full year's rent on December 31st, you can deduct the entire amount in the current year, even if the landlord doesn't receive the payment until the following year.

Practical Note: Implementing this strategy may require a technical analysis of previous tax returns with additional filing requirements (Form 3115, Application for Change in Accounting). Nonetheless, this can still be a significant benefit.

2. Delay Billing: A Simple Yet Effective Strategy

If you're on a cash-basis accounting method, delaying billing your clients or customers until after December 31st can shift your income to the next tax year. This straightforward tactic can significantly impact your tax liability.

Example. Jake, a dentist, usually bills his patients and the insurance companies at the end of each week. This year, however, he sends no bills in December. Instead, he gathers up those bills and mails them the first week of January. Presto! He postponed paying taxes on his December 2024 income by moving that income to 2025.

3. Invest in Business Equipment: Maximize Your Deductions

Increased limits on Section 179 expensing now enable 100 percent write-offs on most equipment and machinery, whereas bonus depreciation enables 60 percent write-offs. Either way, when you buy your equipment or machinery and place it in service before December 31, you can claim a large tax deduction this year.

Qualifying Section 179 and bonus depreciation purchases include new and used personal property such as machinery, equipment, computers, desks, chairs, and other furniture (and certain qualifying vehicles).

4. Harness the Power of Credit Cards

If you are a single-member LLC, sole proprietor, or corporation, the date you charge a business expense to your business credit card is the date you can claim the deduction. By strategically using your credit card for business purchases, you can accelerate your tax deductions.

Practical Note: Suppose you operate your business as a corporation and you are the personal owner of the credit card. In that case, the corporation must reimburse you if you want the corporation to realize the tax deduction, which happens on the reimbursement date. Thus, submit your expense report and have your corporation make its reimbursements to you before midnight on December 31.

5. Don't Underestimate the Power of Losses

If your business deductions exceed your business income, you have a tax loss for the year. With a few modifications to the loss, tax law calls this a “net operating loss,” or NOL. And the good news is that NOLs can turn into future cash infusions for your business because you carry 2024 NOLs forward to future years.

What does this mean? Never stop documenting your deductions, and always claim all your rightful deductions. We have spoken with far too many business owners, especially new owners, who don’t claim all their deductions when those deductions would have produced a tax loss.

6. Capitalize on Qualified Improvement Property (QIP)

QIP is any improvement made by you to the interior portion of a building you own that is non-residential real property (think office buildings, retail stores, and shopping centers)—if you place the improvement in service after the date the building was placed in service.

The big deal with QIP is that it’s not considered real property that you depreciate over 39 years. QIP is 15-year property, eligible for

• immediate deduction using Section 179 expensing, and

• 60 percent bonus and MACRS depreciation.

To get the QIP deduction in 2024, you need to place the QIP in service on or before December 31, 2024.

With a coordinated effort, we can optimize 2024 taxes and secure significant savings for your business.