As a business owner, you know reducing your tax liability is crucial for your company’s financial health. However, navigating the complexities of tax planning can often feel like wandering through a maze. As we enter tax season, it’s a great time for businesses to review their financial strategies and explore opportunities to maximize their tax savings. As has been said by many, if you don’t plan to save, you plan to pay. Consider these five tips for maximizing your tax savings in 2024.
Leverage available tax deductions and credits
When it comes to taxes, financial incentive opportunities at the state and local levels are often available to reduce your obligations. Before applying, it’s important to confirm you meet the compliance needs for the tax incentives and credits you’re interested in. The compliance rules for incentives are always evolving, and meeting the qualifying criteria can become complicated — especially if you do business in multiple cities/states. Capital expenditures, research and development, and hiring and training new staff are just a few ways you may be eligible for tax credits. Tax incentives can greatly reduce your tax liabilities and provide access to additional funding for your future projects, so it’s recommended to routinely evaluate available opportunities and apply when applicable.
Plan for depreciation and capital expenditures
Strategically planning your capital expenditures can have a direct impact on your tax liability. Timing is everything! You may want to expedite a purchase before the end of the tax year to accelerate depreciation and claim deductions sooner. Conversely, it may be in your best interest to delay a purchase until the following year to defer depreciation and reduce taxable income in the current year. It’s also important to be mindful of the specific asset categories and their depreciation recovery periods. For example, certain assets may be eligible for bonus depreciation or have shorter recovery periods, allowing for accelerated depreciation.
Optimize retirement contributions
You will reap both short- and long-term benefits when you maximize your retirement contributions. The resulting reduction in taxable income can lead to significant tax savings by potentially placing you in a lower tax bracket or making you eligible for various tax credits and deductions, benefiting both your business and your personal financial situation. The tax advantages associated with retirement contributions serve as an incentive to save while lowering your current tax burden.
Stay compliant with state and local taxes
Staying compliant with state and local tax (SALT) regulations is essential for maximizing your overall tax savings. Sales and use tax, payroll tax, state income tax, property tax, business license tax and franchise tax are just some examples of state and local regulations that require ongoing attention and adherence to changing laws. Given the complexities of tax code, even simple errors in compliance can result in hundreds of thousands of dollars in additional costs. Have you ever had a tax compliance review done at your company? If you conduct business in multiple states, it’s recommended to partner with a tax professional so that they can provide guidance specific to your industry and location and help you navigate the complexities of SALT planning.
Seek expert tax guidance
If you’re feeling lost in the maze of tax planning, consult with a tax professional who can help you create a strategy to optimize your tax plan and minimize your overall burden. Starting early provides your business with the opportunity to proactively manage any tax liabilities, optimize tax-saving strategies and align your financial goals with your tax obligations. Taking a proactive approach with an expert by your side will give you an overhead perspective of the maze, allowing your business to achieve greater tax efficiency and potentially save a significant amount in taxes.
At Creative Planning Business Services, we understand the challenges businesses face when it comes to tax planning. Our team of experienced professionals is here to help you at every step of the process. Don’t navigate the maze alone! Together, we can develop a customized tax strategy that maximizes your tax savings and positions your business for long-term financial success. Schedule a meeting with our team to get started.
