Ho Ho Hold On To Your Money: Top 3 Year-End Tax Strategies for a Festive Wallet🎅💵

December 9, 2024

Deck the Halls with Savings! With 2024 wrapping up, it's crucial for business owners, side hustlers, and high-income earners to plan their taxes before December 31st. This ensures you keep more of your hard-earned money in your pocket

Don't wait until tax season—it's too late by then! You must to complete these steps by December 31st to get the most deductions and lower your taxable income for 2024. Whether you want to lessen your tax load or make the most of your business deductions, this guide offers practical tips to help you stay ahead. Stay tuned for a holiday secret that can help you save big this season!

1. Optimize Your Retirement Contributions

One of the best and smartest opportunities to lower your taxes is by ramping up your retirement savings. Contributing to a retirement account sets you up for the future and slashes your taxable income today! Why not kill two birds with one stone? (Note: Please don’t actually kill two birds or any for that matter—they’re very friendly.) You can create a win-win situation by contributing to a 401(k) and IRA!

401(k) and Similar Plans: Contribute up to $23,000 for 2024 or $30,500 if you’re 50+ years old. This is like stuffing your financial stocking—each contribution adds more gifts for your future self. 🎁💼

IRA Contributions: Max out your IRA with a $7,000 contribution (or $8,000 if you're 50 or older). This is like building a gingerbread house for your financial future—sturdy and sweet, ensuring a delightful and secure foundation. 🏰💰

Roth Conversions: Consider converting traditional IRAs to Roth IRAs this year to take advantage of tax-free growth, especially if you expect your income to increase later.  Remember, the conversion is taxable in the year of conversion. Get the conversion out of the way and invest in your Roth IRA. It's like planting a small tree now that will grow into a big, beautiful Christmas tree later. 🎄🌟

Tip: Give us a call or schedule a FREE discovery call to gain insights into advanced retirement planning techniques for yourself. 

2. Maximize Business Tax Deductions 🎅📉

Considering buying new equipment? Now is the time to buy and enjoy the write-off before year-end. Every business expense before December 31, 2024 can be a great way to significantly reduce your tax liability.

Bonus Depreciation:

Deduct up to 60% of the cost of qualifying new or used assets, like vehicles and more, placed into services this year. But hurry—the benefit drops to 40% in 2025 and disappears by 2027. It’s like catching a special holiday sale—grab those savings while you can! 

Section 179 Deduction:

Buying a SUV or truck? Make sure it's between 6,000-14,000 lbs. GVWR, and you can deduct up to $30,500 of the purchase price right away! Larger trucks or vans with 6-foot beds can be eligible for deducting the full cost. Remember, the assets must be used primarily for business. Go get that big Christmas present for your business before year-end.🎁🚚

*Pro tip: Stack both Section 179 and bonus depreciation to maximize your write-offs. Make sure to purchase AND place in service by December 31, 2024 to unlock the deductions for the year.

3. Pay Your Family to Work(The Legal Way!)👨‍👩‍👧‍👦💸

Get your family involved in your business. This can unlock significant savings if you follow the rules!

Children under 18:

All the money you pay your kids isn’t taxed for Social Security and Medicare. It’s like giving them an early Christmas gift while saving on taxes! 👧💵

Older children and relatives

No problem! Use 1099s for freelance or independent contractor style payments. Pay them as freelancers with 1099 forms. This helps you save on taxes and encourages them to earn money. Spread the holiday cheer by helping them start their own businesses or side hustles. 🎅💼🎁 

This is a fantastic tax strategy for small businesses and is often passed over. It’s a simple yet profound way to help them build their entrepreneurial spirit. 

*Extra pro tip: Keep all payment records up-to-date by 12/31/2024 to avoid any IRS issues. 📝🚫😰

Holiday Bonus

Here’s a sweet strategy we use often: If you've been hit hard by Self-Employment Taxes and you have an LLC (which can sometimes be another planner’s major mistake), don’t stress! You can elect to have it taxed as an S-Corporation, effective January 1st, 2025. This switch can make a substantial difference in your tax savings!

Wrapping Things Up,

To unlock savings, year-end tax planning requires action before December 31st. These strategies—from maximizing deductions to optimizing retirement contributions—can greatly reduce your 2024 tax bill. However, every situation is unique. Consulting with a CPA or tax advisor ensures you apply the best strategy for your needs.

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