5 Business Tax and Budgeting Tips for 2024
As a new year unfolds, it’s natural to get hyper-focused on the strategies around things like expanding sales targets and hiring plans — the driving forces of your business income growth. However, it’s equally crucial to weave tax strategies and budget considerations into the fabric of your plan, so your business can keep more of what it earns. A solid financial blueprint integrates tax efficiency, expense planning, and strategic investments, ensuring your growth goals are matched by savvy financial stewardship.
Let’s dive into some key strategies that will help you balance your growth strategies with robust tax planning and budget management, setting a course for a profitable and well-managed year ahead.
- Income Review and Projection
Use this time to review your current income and project future income for your business in 2024. To ensure your business is operating as tax-efficiently as possible, you need to know what this year’s earnings looked like and where you are headed next year.
Begin by looking at your income and deduction information from your last tax return and make any necessary adjustments based on current data. From there, you can calculate, or “project,” how much you will pay in taxes and what tax bracket you will be in for the coming year.
- Consider the Timing of Income
You may be able to reduce your tax liability with thoughtful timing of business income. A tax professional will be able to help assess if it would be advantageous to defer income to the following year.
A similar strategy can be used if you expect to have a higher tax rate due to being in a higher tax bracket in 2024 or 2025. In this case, the inverse approach would be used – increase your income in the current year to allow more income to be taxed at a lower rate.
- Defer Expenses Where Appropriate
Equipment purchases often make up the bulk of expenses for small businesses. Things like company vehicles, IT needs, and so on are big investments.
Like the strategy for income, you can speed up deductible expenses into the current year to limit your tax liability. Section 179 of the IRS Tax Code allows business owners to deduct the cost of certain property as an expense when the property is placed in service.
This deduction can aid business owners by alleviating big financial purchases you need to make. It’s key to implement this strategy in Q4 when you are reviewing and projecting the following year’s income and need to time an expense for the deduction.
- Write Off Bad Debt
If your business has receivables that you haven’t been able to collect, it may be time to write these off as bad debt. This is where an aging report to see who hasn’t paid is important. If you’ve made reasonable, but unsuccessful attempts to collect, you can remove the amount owned from your total sales. By reducing your income, your tax liability will also be lowered, and you can stop chasing the unpaid debt.
- Evaluate Retirement Contributions
If you’ve yet to develop a retirement plan for your business, or if you are unsure that your current plan is the right fit, you could be missing out on tax-saving opportunities.
Work with a financial professional to ensure your plan is working the best for your business. From SEP IRAs to 401(k)s, contributions made by employers are tax-deductible and are not subject to employment taxes. For those already offering retirement account benefits to employees, consider fully funding employee accounts at year-end.
Employee-owners should be sure to contribute the IRS-allowed maximum into their own retirement accounts at year-end. This will lessen your tax burden for the current year by reducing your taxable income.
As we roll up our sleeves for 2024, let’s blend your big dreams with tax-intelligent financial planning. It’s all about making sure your hard work pays off in profits you can keep and reinvest in what matters to you.
Contact our team at Davie Kaplan for help mapping out your 2024 plan and make sure you keep more of what you earn.