How Can I Lower My Tax Bill After Year-End?

Posted on February 07, 2024

If you have been listening to our Podcast or following our Blog for awhile you will know that we stress the importance of tax planning throughout the year and NOT during tax season. The fact remains true that if you are looking for and thinking about tax strategies now (in tax season) for last year (2023) you missed out on a lot of opportunities.

With that being said, we always do say that there are a few options available for those later comers and that’s exactly what we want to talk about here. We are going to outline tax strategies that may be available to you now, in tax season, for last years (2023) activity.

What Retirement Tax Strategies Are Available After Year-End?

  • Traditional IRA or Roth IRA – These are standard retirement accounts available to both business owners and non business owners. You can contribute to a Traditional IRA or Roth IRA until your tax filing date (not including extensions).
    • Traditional IRA Contribution Limits
      • $6,500 (or $7,500 if 50 or older)
      • No phase out if you and your spouse are not a participant in an employer plan.
      • Starts to phase out if you are a participant in an employer plan and AGI’s of $116k (Married) and $73k (Single).
        • Note: If you are a nonparticipant married to a participant the phase out starts at $218k.
    • Roth IRA Contribution Limits
      • $6,500 (or $7,500 if 50 or older)
      • Starts to phase out at AGI’s of $218k (Married) and $138k (Single).
  • EmployEE Contributions
    • Unavailable, must have been done before 12/31.
  • SEP IRA / Solo 401k / 401k / Profit Share (aka EmployER Contributions)
    • You can contribute until your tax filing date including extensions the employER contribution portions.
      • Example: You are a sole proprietor and want to make a SEP IRA contribution towards 2023 and you have extended your personal return. You can make that contribution up until the date you file with a maximum of the extended due date.
    • SEP IRA and 401k EmployER Contribution Limits
      • 25% of W2 Wages or 20% of net self-employment income if a sole proprietor
      • Max of $66,000

What Business Tax Strategies Are Available After Year-End?

  • Complete and Accurate Bookkeeping
    • If you have not yet completed your bookkeeping, do so now. This is an area where so many deductions are missed.
    • Go through all of your spending for the year with a fine tooth comb to see if there are any deductions related to the business that can be added to the bookkeeping, if not already.
    • Think of things like: Internet, Cell Phone, Asset Purchases (Laptops, Tablets, Smart Watches, etc.), Meal Expenses, Gifts, Insurance, Office Expenses/Supplies, Travel, etc.
    • Essentially take a little time to see if there were business expenses that may have been paid personally that can be switched over and included your bookkeeping and thus tax return.
  • Home Office Deduction
    • Do not be afraid to take a valid home office deduction. Somewhere along the line accountants tried to scared business owners with this one but it is a completely legal deduction that every business owner should be taking advantage of.
  • Automobile Expenses
    • Vehicle purchases would have needed to be made before 12/31 and would likely then be included on your bookkeeping but here we are specifically talking about mileage. Did you have a personal vehicle that you had some business use on? Be sure to calculate that and include it in your tax filing.
  • Cost Segregation Study
    • After the tax year has ended, rental property owners are still able to consider conducting a cost segregation study. This financial analysis allows them to accelerate depreciation deductions on their property, which can lead to significant tax savings. The study involves separating the property’s components into categories that depreciate over different time spans. For example, personal property and land improvements can often be depreciated much faster than the building itself. By doing this, owners can claim larger depreciation expenses in the early years of property ownership, reducing their taxable income.

What Other Tax Strategies Are Available After Year-End?

  • Health Savings Account (HSA) – As you may know from our article here, we believe that an HSA is a strategy everyone should be utilizing and maxing out if you qualify and have the funds available to do so.
    • You can contribute to your HSA until your tax filing due date (April 18). Basically you are able to contribute to your HSA for tax year 2023 up until April 15, 2024.
      • Reminder 2023 HSA contributions are limited to $3,850 for self-only and $7,750 for family and you need to have a HDHP. Check out our article for more information on HSAs.
  • Coverdell IRA – This is an IRA designed for education savings. You do not get a tax deduction for this one but when you withdrawal from it for qualified education expenses, it is tax free (including any earnings).
    • You can contribute to a Coverdell IRA until your tax filing due date (April 15).
      • Reminder 2023 Coverdell contributions are limited to $2,000 per beneficiary. The person contributing must have adjusted gross income of $110k or less (Single) or $220k or less (Married).

Calendar Deadlines for In-Season Tax Saving Strategies

  • April 15th Filing Date 
    • Traditional or Roth IRA
    • Health Savings Account (HSA)
    • Coverdell IRA
  • Filing Date (Includes Extensions)
    • EmployER Contributions to SEP IRA, Solo 401k, 401k, Profit Sharing, etc.
    • Business Strategies

Hopefully this gives you a few last minute options and if you are stuck with a big tax bill this year, let this serve as a big reminder to get on top of tax planning for 2024 earlier this year so you can ensure you have more strategies available especially the ones that must be implemented before year-end.

If you are not yet a member of TaxElm, this serves as a great opportunity to join and start diving into our training to ensure this is the year you pay the least amount in taxes as legally possible.

It is never too early to start tax planning!

  • The Time Is NOW To Start Paying Less In Taxes. Join TaxElm and start eliminating taxes and growing your wealth!

    What you’ll get:

    • Tax Savings Blueprint and Training: We’ll provide you with a customized tax plan that is tailored to meet your specific needs and goals. Along with that, you have access to our library of training modules, implementation guides, supporting documents, and more.
    • Unlimited Access to Tax Experts: Got a specific question about a tax strategy? You’ll have access to our team of tax experts to get the accounting and tax answers you need.
    • Annual 1-on-1 Live Consultation: Once a year you get a live meeting with a tax expert to discuss anything tax savings you would like. This is your time to get your questions answered live 1-on-1.
    • Annual Bookkeeping Analysis: Annually you will submit your financials to our team of accountants and we will put together a high level business financials overview report custom to your business.
    • Monthly Group Webinar and Training: Every month, we host a live, virtual training session on a key tax topic. Join us live and bring your questions or view the recording on your own schedule.
    • Partner Directory and Discounts: You get exclusive, members-only rates and access to our expert referral network for accounting, bookkeeping, tax preparation, payroll, financial planning, legal, retirement planning, tax resolution, and more!

    It is like having a tax strategist walking with you along this entrepreneurial journey!

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