The end of the year is approaching, and if you’re concerned about a looming tax bill, there are still several strategies available to help minimize your liability. Whether you’re a business owner or simply looking to reduce your personal tax burden, taking proactive steps now can make a meaningful difference.
Strategies for Business Owners
- Accelerate Business Expenses: If you’re a small business using the cash accounting method, paying for necessary expenses before year-end can reduce your taxable income. Consider accelerating purchases, such as office supplies, equipment, or even prepaying some rent. This can decrease your profit on paper and, consequently, your tax liability.
- Consider Bonus Depreciation or Section 179 Deductions: These tax provisions allow businesses to immediately deduct the cost of qualifying equipment and property, rather than depreciating them over time. If you’re planning on buying machinery or office furnishings, this can be a valuable way to reduce your taxable income.
- Contribute to a Retirement Plan: Setting up or maximizing contributions to retirement accounts like SEP IRAs or solo 401(k)s can lower taxable income. Contributions are often tax-deductible, offering a great way to save for the future while reducing your tax burden today.
Strategies for Individuals
- Maximize IRA and HSA Contributions: Contributing to an IRA or Health Savings Account (HSA) is a powerful tool for lowering taxable income, with the added benefit of saving for retirement or healthcare expenses. Make sure to check the annual contribution limits to take full advantage of the tax deductions available.
- Donate to Charity: Charitable contributions can be a valuable deduction, especially if itemizing. Donations of cash or appreciated assets, like stocks, can provide additional tax savings, allowing you to support causes you care about while lowering your taxable income.
- Harvest Capital Losses: If you have investments that have lost value, consider selling them before year-end to offset capital gains elsewhere. This can reduce your tax bill on investments by offsetting gains with losses.
While these are some common strategies, every tax situation is unique. Consulting with a tax advisor can help you tailor these strategies to your needs. If you’re ready to explore ways to reduce your tax liability before the year ends, contact us today to schedule a consultation.
