So you missed year end tax planning.... Or did you?
Tax Strategies You Can Still Use After Year-End
Many taxpayers assume that once December 31 passes, their opportunity to tax plan for the year is over. While year-end planning is extremely important, several valuable tax strategies can still be implemented after the tax year has ended but before the return is filed.
For individuals and small business owners, post-year-end tax planning can still create deductions and maximize retirement contributions. If you haven’t filed your tax return yet, the following strategies may still help you lower your tax bill. Tax preparation should never simply be about reporting numbers. It should be about identifying opportunities. A careful review of your financial situation before filing your return may reveal tax savings that would otherwise be missed.
1. Maximize Retirement Contributions
Retirement contributions are one of the most effective ways to reduce taxable income. Taxpayers can still make contributions for the previous tax year to both Traditional IRAs and Roth IRAs. These contributions are generally allowed until the tax filing deadline. Contributions to a traditional IRA may reduce taxable income if the taxpayer qualifies for the deduction. Even when a deduction is not available, retirement savings still grow tax-deferred. Meaning if you have the means and the desire, action should be taken for your benefit. Retirement planning is and always will an essential part of long-term tax strategy.
2. Use a SEP IRA for Self-Employed Tax Savings
Business owners have additional opportunities to reduce taxes through retirement contributions. One of the most flexible options is the SEP IRA. Ideal for a single owner or small business owner, A SEP IRA allows business owners to make substantial deductible contributions based on business income. Unlike many retirement plans, contributions can be made up until the tax filing deadline, including extensions. Benefits include:
Large potential deductions
Flexible contribution amounts
Simple administration
For profitable businesses, this strategy can significantly reduce taxable income even after the year has ended, as well as create significant retirement savings for those involed.
3. Contribute to a Health Savings Account
Taxpayers enrolled in a high-deductible health plan may qualify to contribute to a Health Savings Account. HSA contributions can still be made for the prior year until the tax filing deadline. HSAs offer a rare triple tax advantage:
Contributions may be tax deductible
Investment growth is tax free
Withdrawals for qualified medical expenses are tax free
For many taxpayers, an HSA functions as both a healthcare savings tool and an additional retirement account. In this authors personal opinion this type of account, with proper planning, can be one of the most effective and benefical accounts ever utilized.
4. Identify Missed Business Deductions
When preparing tax returns, many businesses discover expenses that were not properly categorized during the year.
Commonly missed deductions include:
Software and technology subscriptions
Professional services
Business insurance
Equipment purchases
Marketing and advertising expenses
Auto Expenses
Home Office Deductions
Accurate bookkeeping and careful review of financial records can ensure these deductions are properly claimed.
5. Review Owner Compensation for S-Corporations
Owners of S-corporations have unique tax planning considerations.
Income is typically divided between owner salary and business distributions
Salary is subject to payroll taxes, while distributions are not. However, the Internal Revenue Service requires S-corporation owners to pay themselves “reasonable compensation.” Reviewing compensation levels before filing may help ensure compliance while minimizing unnecessary payroll taxes.
6. Claim Overlooked Tax Credits
Tax credits are particularly valuable because they reduce taxes dollar-for-dollar.
Many taxpayers fail to claim credits they qualify for.
Examples include:
Child-related credits
Education credits
Retirement savings contribution credits
Residential energy credits
Because credits directly reduce tax liability, they can have a significant impact on the final tax bill.
7. Review Depreciation Elections
Businesses purchasing equipment, vehicles, or other assets often have multiple depreciation options. These elections are typically made when the tax return is prepared. Common depreciation strategies include:
Section 179 expensing
Bonus depreciation
Standard depreciation schedules
Choosing the right method can significantly affect taxable income and future tax planning.
8. Adjust Estimated Tax Payments
Taxpayers who did not pay sufficient estimated taxes during the year may face penalties. Before filing, it may be beneficial to review estimated tax payments and determine whether additional payments should be made.
The Value of Proactive Tax Planning
The most effective tax strategies occur before the end of the year. However, post-year-end planning still offers meaningful opportunities to reduce taxes. If you would like for us to take a look at your situation and see if you can benefit, please reach out and set up an appointment today!