YOUR TAX PLANNING CHECKLIST FOR 2024
Business Planning
Businesses large and small have unique considerations when it comes to retirement planning and tax planning .
Retirement Contributions
Solo 401 ( k ) Plan Solo 401 ( k ) plans allow for a tax-deductible pension contribution for business owners of up to $ 76,500 for those over 50 and $ 69,000 for those under 50 . This applies to 1099s , S-Corps , LLCs , Schedule C businesses . Employees are not eligible .
SEP ( Simplified Employee Pension Plan ) IRA Up to $ 69,000 may be contributed to an SEP IRA . Only the employer contributes up to the lesser of 25 % of each eligible employee compensation and $ 69,000 . Must include all eligible employees .
Defined Benefit / Cash Balance Plan 100 % of taxable income may be contributed up to $ 275,000 per year to this plan in 2024 . This must cover all eligible employees working > 1 year . The owner usually captures approximately 80 % of contribution benefits . Profit-share requirements can be modest . Defined Benefit plans are complex trust based vehicles , with annual costs (~$ 10K ), and require actuarial valuations .
Depreciation - Plant and equipment expenditures The 2017 TCJA significantly expanded tax write-offs for qualifying expenditures on plant and equipment through first year Special Depreciation ( Section 179 ) and Bonus Depreciation ( Section 168 ).
Net Operating Losses ( NOLs ) The CARES Act of 2020 introduced a five-year carry-back for Net Operating Losses ( NOLs ) generated in years 2018 through 2020 . This NOL carry-back ability , combined with the removal of the Excess Business Loss provisions for tax years beginning before 2021 , presents planning opportunities for those with NOLs or who may be able to generate losses due to depreciation write-offs .
Qualified Business Income ( QBI ) Deduction Pension contributions and charitable donations are not only tax-deductible in themselves , but can bring in a secondary benefit by lowering taxable income for business owners who are above the Qualified Business Income ( QBI ) deduction thresholds . When business income is lowered through pension and charitable contributions , the QBI 20 % deduction may get turned on – effectively one tax deduction can lead to a secondary deduction . This additional benefit is particularly relevant where the business is a Specified Service , such as in healthcare and legal practices .
The new year brings new opportunities for implementing tax strategies . This checklist can give you a starting point for what to consider . We at BakerAvenue can help you navigate through the complexities of tax planning and are committed to helping you through life ’ s transitions . Contact us to start the conversation . pg . 8