Year-End Tax Planning Tips for Businesses: Preparing for 2025

As 2024 draws to a close, it’s an ideal time for businesses to make final adjustments to their tax planning strategies for the upcoming year. Taking proactive steps now can significantly impact your tax obligations for 2025. Here are some key strategies to consider:

1. Take Advantage of Charitable Donations

Charitable donations can enhance your company’s community involvement while potentially lowering your taxable income. For pass-through entities like sole proprietorships, partnerships, or S-corps, donations will pass through to your personal tax return, potentially limiting direct tax benefits. C-corporations, however, can deduct charitable contributions from their business income, which may reduce taxable income.

Ensure that donations are made to qualified charities. Note that certain donations, such as political contributions or raffle tickets, are not deductible. Services performed for charitable organizations are also non-deductible, but expenses incurred during those services can be deducted.

2. Make Necessary Expenditures and Asset Purchases

Consider investing in depreciable property before the end of 2024. For assets under Section 179, such as computer software, HVAC systems, or security systems, the Section 179 expensing limit is $1.16 million with an investment ceiling limit of $2.89 million. Additionally, first-year bonus depreciation is at 80% for 2024, down from 100% in previous years. This provides an opportunity to invest in assets and maximize your deductions before the bonus depreciation rate decreases further.

3. Consider a De Minimis Safe Harbor Election

The de minimis safe harbor election allows businesses to expense certain small-dollar items instead of capitalizing and depreciating them. To qualify, businesses must have an applicable financial statement (AFS) and a written accounting policy specifying a dollar limit for qualifying expenditures. For 2024, the maximum limit is $5,000 for businesses with an AFS and $2,500 for those without. Proper documentation and tracking of expenses are crucial to meet the requirements.

4. Make Estimated Year-End Passthrough Entity Tax Payments

For passthrough entities like partnerships, S-Corporations, and sole proprietorships, making estimated tax payments before the end of the year could provide additional tax deductions and help avoid underpayment penalties. Be aware of state-specific rules and ensure compliance with local regulations.

5. Look into Qualifying for the QBI Deduction

The Qualified Business Income (QBI) deduction, or the “20% Business Deduction,” is a valuable tax planning strategy. It applies at the individual level, not the entity level, so C-corporations are not eligible. Evaluate year-end bonuses and consider whether to accelerate or defer income and expenses. Gather all relevant financial records and consult a tax professional to determine your eligibility and maximize this deduction.

Partner with Nuve for Expert Tax Planning

As 2025 approaches, let Nuve help you navigate your tax planning needs with customized strategies to maximize your savings. Book a call with us to learn more about our services and how we can support your business.

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The information provided in this blog is intended for general guidance and educational purposes only. It is not a substitute for personalized professional advice. Every individual's financial situation is unique; therefore, you should review your specific needs and consult with qualified professionals, such as certified public accountants or tax advisors, before making any decisions. While we strive to provide accurate and up-to-date information, we do not guarantee the accuracy, completeness, or currency of the content. By using this blog, you acknowledge that you have read and understand this disclaimer, and you agree to use the information responsibly, in conjunction with advice from qualified professionals, to make informed financial decisions.