As the year comes to a close, franchise and small business owners have a great opportunity to get their financials in shape. Taking a thoughtful look at your expenses now can save money when tax season arrives and make filing a much smoother process.
This guide focuses on actionable strategies to help you maximize tax deductions, simplify tax filing, and set yourself up for success.
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Review Your Expenses with a Purpose
Taking the time to go through your expenses now can reveal areas where you’ve missed opportunities.
Here’s how to approach it:
- Look for missing information. Are there any receipts or records that need to be added to your books? Ceterus can help identify gaps or untracked expenses.
- Try to spot trends and outliers. Do this by comparing your spending this year with previous years to find anything unusual or underutilized.
- Focus on specific categories. Expenses like software subscriptions, mileage, and charitable donations are often overlooked.
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Stay Ahead of Tax Law Changes
Tax regulations change frequently, so staying informed is key. A few things to keep in mind this year:
- Bonus Depreciation Phase-Out: The bonus depreciation rate has decreased to 60% in 2024 (down from 80% in 2023). Businesses can still deduct a significant portion of equipment purchases upfront, but the phase-out will continue in 2025.
- State-Level Tax Incentives: Many states are offering credits for energy-efficient upgrades, workforce training, and R&D investments. Check with your state tax office to see if your business qualifies.
- Higher Standard Mileage Rate: For 2024, the standard mileage rate for business use of a vehicle has climbed to 67 cents per mile, allowing for a slightly higher deduction.
Reminder! Be prepared for anything, including an IRS audit. Maintain detailed, organized records and keep personal and business expenses separate to reduce risk.
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Focus on Tax Deductions
Not all tax deductions are equal, and some can significantly lower your taxable income. Let’s break down where the biggest wins are for small business owners:
- Technology Investments: Software, hardware, and digital tools can often be expensed immediately or amortized based on tax rules.
- Marketing and Rebranding: Rebranding efforts, new website builds, or ad campaigns qualify as deductions and help you grow while reducing tax liabilities.
- Business Development Travel: If you attended conferences or client meetings, don’t just deduct the travel costs—include lodging, meals, and transportation.
- Home Office Expenses: Use the simplified method (deducting $5 per square foot) or calculate a percentage of rent, utilities, and maintenance for your workspace.
- Employee Benefits: Payroll-related deductions go beyond salaries. Health insurance, retirement contributions, and bonuses paid before year-end qualify.
- Vehicle Costs: Choose between tracking mileage or deducting actual costs like insurance and fuel, depending on which offers the greater benefit.
- Charitable Contributions: If your business donates goods or funds, these are often deductible, but proper documentation is critical.
Deep Dive: Many business owners miss out on deductions for professional development, such as courses or certifications. These are fully deductible and directly contribute to long-term business growth.
Read more about tax deductions here.
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Use Year-End Planning to Strengthen Your Business
Tax preparation is also a chance to think about your business as a whole and plan for the year ahead.
Try to reinvest in growth! If you have extra cash on hand, consider investing in equipment, technology, or employee development. These costs often qualify for deductions and can set you up for long-term success.
Consider what you can do to improve cash flow. Reviewing your financials now can help you spot opportunities to improve cash flow and start the new year strong.
Remember, year-end planning isn’t just about taxes—it’s about building a stronger financial foundation for the future of your business.
Ceterus As Your Tax Resource
Ceterus is your trusted partner for clear financial insights, tech-enabled bookkeeping, and tax prep, helping franchise and small business owners build a stronger future. Our experts manage tax forms for corporations and partnerships, and can also handle personal taxes.
Ready to relieve your tax worries? Schedule a consultation with us today!
