At Virjee Consulting, our primary goal is to reduce your tax burden by forward planning and then helping you use your business to reach financial freedom.
The final quarter of the year is a crucial period for owners of small businesses and corporations, as well as independent contractors. It’s the time to implement strategic tax measures to optimize your financial position before the close of the fiscal year. Here are some strategies to consider in preparation for the upcoming tax season:
- Timing Depreciation with the optimal method:
Evaluate the potential advantages of bonus depreciation, enabling you to accelerate depreciation on specific asset purchases in the first year.
Explore the benefits of the Section 179 deduction, which allows you to write off qualifying equipment and property purchases. The deduction limits can yield significant savings.
Consider opening a new location and applying the above strategies in conjunction before December 31.
- Tax Credits:
Investigate the availability of various tax credits that could benefit your business. Research and determine if you qualify for credits such as the Work Opportunity Tax Credit, Research and Development Tax Credit, or others relevant to your industry.
- Medical and Healthcare Expenses:
Maximize health-related tax benefits by contributing to Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs).
- Retirement Contributions:
Contribute the maximum amount possible to retirement accounts like a 401(k) or SEP-IRA, benefiting from tax-deductible contributions. Ensure compliance with contribution limits based on your business structure.
- Charitable Contributions:
Make Charitable Contributions before the year’s end to take advantage of tax deductions.
- Acquisition of Business Real Estate:
Leverage this approach in combination with other real estate strategies to significantly reduce your tax burden. Keep in mind there are stringent rules to qualify for substantial deductions; consult with a tax expert before any purchases.
- Real Estate Investment Using the STR Strategy:
This complex strategy can offer substantial tax savings by purchasing property for short-term rentals, such as Airbnb. Consult with your tax consultant before implementing this strategy, considering its many intricacies.
- Quarterly Estimated Taxes:
If your business pays quarterly estimated taxes, ensure you maintain a payment schedule that aligns with your income to avoid underpayment penalties. Interest rates for IRS Taxes due are at the highest level in a decade and can add up.
- Hiring Your Children in an Independent Business:
This strategy can yield significant savings, particularly if you have teenage children. Note that S corporations may not align with this approach. However, if you or your spouse own a separate business, potential savings can be explored after careful evaluation.
- Plan for the Upcoming Year:
Use this time to initiate planning for the forthcoming tax year. Consider any changes in your business structure, objectives, or operations that may influence your tax strategy.
- Maintain Accurate Records:
Accurate and up-to-date financial record-keeping is vital for tax compliance and can reveal opportunities for deductions.
- Year-End Bonuses:
Consider the feasibility of offering year-end bonuses to employees or owners, as these can be deductible expenses.
Keep in mind that tax laws are subject to change, so it’s imperative to remain informed and adapt your tax strategy accordingly. Collaborate with a tax professional specializing in small businesses and corporations who can provide personalized advice tailored to your unique business needs.