As a successful coach or creator, understanding and leveraging your business’s tax deductions before the year closes is crucial. Here's a straightforward guide to effective year-end tax strategies that can enhance your financial well-being while reducing your tax liabilities for 2024.

Prepay Expenses Using the IRS Safe Harbor

The IRS provides a tax deduction safe harbor for cash-basis taxpayers, allowing you to prepay and deduct qualifying expenses up to 12 months in advance. This means if you pay for 2025's expenses in 2024, you can claim those deductions on your 2024 tax return. Typical qualifying expenses include business vehicle leases, office rent, and business insurance premiums.

Example: If you pay your office's entire rent for 2025 in December 2024, you can deduct that amount from your 2024 taxes. Ensure you use a trackable mailing method like certified or registered mail to prove the payment date.

Strategy for Unbilled Revenue

To manage taxable income, consider delaying invoices until after December 31. If you’re a cash-basis taxpayer, money not received within 2024 won’t count as income until 2025, thereby reducing your tax burden for this year.

Example: If you're a consultant, postponing December's invoices to January can defer the income to the next tax year, lessening your immediate tax liabilities.

Invest in Your Business Infrastructure

Under Section 179 of the tax code, you can deduct the full price of qualifying business equipment purchases, up to a certain limit. This could include computers, business furniture, and machinery purchased in 2024.

Planning Note: If your business qualifies for the Section 199A deduction, consider how large purchases might impact this deduction, as increased expenses could potentially lower it.

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Manage Credit Card Charges for Deductions

If you use a business credit card, charges made before December 31 count as expenses for 2024, even if the payment to the credit card company occurs next year. For corporation-run businesses, ensure that any charges made on personal credit cards are reimbursed by the corporation by the year's end to qualify for the deduction.

Review and Claim All Possible Deductions

Never hesitate to claim valid business deductions. Ensure all expenses, from small to large, are documented and justified. If these deductions result in a net operating loss (NOL), this loss can be carried forward to future years, potentially reducing future taxable income.

Address Qualified Improvement Property (QIP) Costs

If you've made improvements to non-residential property, these expenses qualify as QIP and can be depreciated over 15 years instead of 39. To qualify for 2024 deductions, ensure the improvements are in service by December 31.

Takeaways

Prepaying Expenses: Secure a deduction in 2024 by prepaying for next year’s expenses.

Deferred Invoicing: Reduce this year’s taxable income by delaying invoices.

Invest in Business Assets: Leverage Section 179 or bonus depreciation for immediate write-offs on new equipment or furniture.

Credit Card Deductions: Expenses charged to a business credit card by December 31 count for 2024 deductions.

Maximize Deductions: Claim all legitimate business expenses to reduce taxable income.

Handle QIP Correctly: Ensure any qualifying improvements are placed in service by the end of the year to take advantage of favorable depreciation terms.

For seasoned entrepreneurs, managing taxes effectively isn't just about compliance; it's a strategic element of financial planning. By adopting these strategies, you can better position your business for financial success in the coming year. 

If you need a dedicated plan to manage these strategies and ensure consistent tax savings, consider Scheduling a Sales Call with me, for specialized guidance tailored to your business’s unique needs.

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