Year End Tax Planning

Only 91 weekdays left until the end of the year! Below are some tax savings strategies that you will want to take advantage of before year end.

(If you want to discuss year end tax planning, click Book A Meeting.)

1. Solo 401k: If you are a solopreneur, you can contribute to a Solo 401k plan twice, for a total of $70,000 in 2025. Put away up to $23,500 as the employee, and up to 25% of your income as an employer match. This can generate tremendous tax savings.
2. Business Structure Optimization: Should you remain a pass-through LLC, or elect S-Corp status for taxes? If you are a single person company, you probably registered as a single member LLC. Did you know you could save 15% on self employment taxes by electing to be taxed as an S-Corp?
3. Home Office Tax Deduction: Switching from the Simplified Method (SqFt of home office*$5) to the Regular Method (% of home used for business*rent+utilitiess+insurance) may save you thousands in taxes.
4. REIT Dividends: If you claim the Qualified Business Income (QBI) deduction, you can add 20% of qualified REIT dividends to the 20% QBI deduction.
5. Roth Conversions: If you are in a low tax year, due to a drop in income, you may want to convert your Traditional IRA into a Roth IRA. You will pay (low) income tax on it today, but it won’t be taxed again. Ever.
6. 529 College Savings Plans: Enjoy tax-free growth and withdrawals, if the money is used for a qualified college expense like tuition, room & board, etc. Also, depending on your state, you may be eligible for a tax deduction this year (see the map below for details).
7. Portfolio Management: Sell your active mutual funds, which have high taxes, and buy tax-efficient ETFs instead. The "tax drag" on actively managed mutual funds is one of the major reasons why they usually underperform passive ETFs and Index Funds.
8. Health Savings Account (HSA): Triple tax-exempt. Funded with pre-tax money, grows and withdrawn tax-free, as long as it is used to pay for qualified medical expenses.
9. Accelerate Business Expenses: Purchase equipment, software, or office supplies before December 31st to deduct them in the current tax year. You may be able to take advantage of Section 179 deduction for equipment purchases (up to $1,220,000 for 2024).
10. Professional Service Fees: Some professional service fees like accounting, legal, or consulting services may be tax deductible. You may want to pre-pay these fees and accelerate the deduction for 2025.

If you would like to discuss tax planning further, click Book A Meeting.