Strategies to Maximize Deductions & Decrease Taxable Income
Inviting a financial advisor onboard your entrepreneurial journey can be both an exciting and nerve-racking milestone. Trusting someone else with the monetary pulse of your business is no easy decision, particularly when your financial landscape isn't just about numbers. But, engaging in dialogue with your financial advisor about maximizing deductions and reducing taxable income is a voyage worth embarking on.
Let's explore how three key territories — retirement contributions, charitable contributions, and end-of-year expenses/purchases — can equip us with a sturdy rudder, directing us towards a more prosperous financial journey.
This resource is for educational purposes only. Make sure to speak with your tax professional for specific guidance. As state tax laws, federal tax laws, and the small business deductions change, it’s critical that a professional with a solid understanding of the current tax law assist you with filing your taxes. Now, onto the strategies!
SOW NOW, REAP LATER: RETIREMENT CONTRIBUTIONS
A smart move to reduce your business's taxable income is to increase your contributions towards retirement accounts. As an entrepreneur, you may consider Simplified Employee Pension (SEP) IRA, Solo 401(k), or SIMPLE IRA, each with their distinct advantages and contribution limits. An open discussion with your financial advisor can unravel which retirement vehicle best aligns with your financial ambitions.
THE JOY OF GIVING: CHARITABLE CONTRIBUTIONS
Giving to charity is not just about altruism—it can be a powerful tool to significantly lessen your tax liability. Remember, the key lies in authentic documentation, so maintain accurate records of all your philanthropic contributions. Discuss with your advisor about the ceiling on deductions and appropriate entities to donate to in order to maximize deductions legitimately.
TIMING IS MONEY: END-OF-YEAR EXPENSES/PURCHASES
Don't underestimate the importance of timing in finance. Making strategic end-of-year purchases allows businesses to take advantage of deduction policies. Need equipment for the next year? Purchase it now and write it off this year. It’s wise to consult your advisor on making planned purchases to ensure they translate into tax savings effectively.
FINISHING STRONG WITH STRATEGIC FORESIGHT
Tackling year-end tax strategies might initially seem like a formidable task. But with meticulous preparation, in-depth knowledge, and strategic steps, it turns into a manageable and even rewarding journey. And remember, as you navigate these final stretches leading to the tax season, the team at Lighthouse Advisory is here for you every step of the way. We're not just your financial advisors but your trusted partners, committed to empowering your business to sail through every financial journey you embark upon successfully. Together, let's steer your business toward a financially vibrant horizon. Please click here to schedule your introductory consult.
