It’s the most wonderful time of the year…for tax planning.
To make your life simpler, we have attached two tax planning letters. One summarizes 2024 tax issues for individuals and the other shares 2024 tax issues for small business owners.
When you open and scan these letters (it’s ok, we all do it!), please pay attention to the following.
For Individuals
Check your tax withholding and estimated payments – You still have time to calculate and increase federal income tax withholding for the remainder of the tax year to avoid underpayment penalties for 2024. We can help you project your 2024 tax to see if you need to make any adjustments in your withholding.
Consider bunching itemized deductions – You can make charitable contributions and early mortgage payments as well as pay 2025 property tax and state and local taxes in 2024 to help you get a larger itemized tax deduction. However, there are limitations, and you should calculate how close your itemized deductions are to the standard deduction for 2024.
Review your investment portfolio for capital loss opportunities – Whether you have stock sale carryover losses from 2023 or you are selling stocks at a loss this year, there are nontax considerations to keep your portfolio healthy. We can work with you or your financial advisor to determine any buying or selling opportunities that support an improved tax position.
For Small Business Owners
Section 179 expensing and/or bonus depreciation – A 60%, first-year bonus depreciation is available for qualified new and used property that is acquired and placed in service in calendar-year 2024. First, write off as much as you can using Section 179 deductions because this may result in a 100% write-off for fixed assets. Limits are tricky for pass-through organizations, so talk with us about major asset purchases in 2024.
Timing for Business Income and Deductions – Individual and corporate tax rates may or may not change in 2025, but absent any change the individual and corporate tax rates will increase in 2026. That makes it essential to review revenue and expense projections for 2024 and 2025. You can strategize on whether to accelerate deductions or defer income for 2024…or do the opposite by accelerating income and postponing deductions. We can help you decide which option is best.
PTET election for State Income Tax – If the owners of a pass-through entity are subject to state income tax, they may be eligible to use the Pass-Through Entity Tax (PTET) election and pay the state income tax at the entity level. This reduces the taxable business income that flows through to the owners. We can also look at maximizing the Qualified Business Income (QBI) deduction, which can be up to 20% of the business owner’s QBI.
There are many other tax opportunities and considerations in the pdf letters. Again, review both and let us know if you have any questions as we prepare for the 2024 tax season with you.
Click to download the tax letters we have prepared for you below.