Proactive tax planning is especially important this year, as some provisions for businesses in the Tax Cuts and Jobs Act (TJCA) are slated to expire this year.
With a little planning and foresight, business owners can take full advantage of remaining tax credits and deductions while planning for the future. In addition to some immediate actions that business owners can take, there are also some long-term considerations to keep in mind.
First, business owners should make sure they are taking full advantage of any and all employee-related tax benefits, including:
The beginning of the year is a good time for business owners to review some of their tax-related timing adjustments. A little strategic planning can go a long way here, especially when it comes to optimizing cash flow.
Specifically, business owners should consider accelerating their income recognition into the current tax year—particularly if they expect their tax rates to increase in future years.
Alternatively, some businesses may benefit from deferring their income recognition by making equipment and supply purchases before the end of the current tax year.
Business owners should also be aware that after the 2025 tax year, some personal and business income tax brackets will be reverting to pre-TCJA structures. As a result, some business owners may find that their tax brackets are changing — even if their income has been relatively consistent in the last few years.
Now is a good time, then, for business owners to review their own income and tax brackets to mitigate potential tax increases. More specifically, some business owners may want to find strategic ways to lower their taxable income, such as contributing to retirement plans and taking applicable deductions.
Speaking of the TCJA, many provisions of this act will be expiring during the 2025 tax year. As a result, this could be the last year for business owners to take advantage of certain deductions, credits and other tax advantages, including:
Handling business taxes and finding ways to maximize tax credits/deductions isn't everybody's cup of tea, which is why many businesses have dedicated tax professionals to help them navigate these complicated and ever-changing tax laws.
With just a little bit of foresight and strategic planning, businesses can set themselves up for success not just with their 2025 taxes, but in the coming years as well.