As year-end approaches, this is a good time to think about planning moves for individuals and businesses that may help lower your tax bill for this year and possibly next.
For individuals, regardless of any changes in tax law that may occur next year, the standard year-end approach of deferring income and accelerating deductions to minimize taxes will continue to produce the best results for all but the highest income taxpayers, as will the bunching of deductible expenses into this year or next to avoid restrictions and maximize deductions.
Higher-income individuals should be wary of the surtax on certain unearned income, and the 0.9% additional Medicare tax.
The treatment of long-term capital gains can differ depending on the taxpayer’s taxable income, and may affect the decision about whether to sell assets at a capital loss.
Postponing income and accelerating deductions may allow you to claim larger deductions, credits and other tax credits this year.
Businesses other than corporations may be entitled to a deduction of up to 20% of their qualified business income. The deduction may be limited based on the taxable income, whether the taxpayer is engaged in a service (such as law, accounting, consulting, etc.), the amount of W-2 wages paid by the business, and other factors.
Deferring income or accelerating deductions, including W-2 wages, may be advantageous, but the rules for this are quite complex and such moves should not be made without advice.
Businesses should consider making expenditures that qualify for the liberalized business property expensing option that is available for most depreciable property. Business can also claim an 80% first year depreciation deduction for new or used equipment bought and put into service in 2024, and may be able to take advantage of the de minimis safe harbor election to expense the costs of lower-cost assets, materials and supplies.
Year-end bonuses can be timed for maximum tax benefit by both cash- and accrual-basis employers, and the disposition of a passive activity can be timed to free-up any suspended losses.
These are just some of the year-end steps that can be taken to save taxes. Contact us so we can tailor a plan that will work best for you.