Introduction

As the year draws to a close, small business owners have a unique opportunity to reduce their tax liability and boost their bottom line by taking advantage of year-end deductions. By maximizing available write-offs, you can ensure your business is in the best possible financial position heading into the new year.

Here’s a breakdown of key deductions small businesses should take advantage of before year-end:

1. Business Expenses (Office Supplies, Equipment, Software, and Subscriptions)

Your day-to-day business operations likely involve various expenses that can be deducted, including office supplies, equipment purchases, and subscriptions to software or online services. These costs add up over the year, so make sure they’re captured as deductions.

Action Plan:

• Review your expenses for items like pens, paper, printer ink, and other office supplies.
  
  
• For larger purchases (computers, printers, etc.), check if you can fully deduct the cost or apply depreciation over several years.
  
  
• Don't forget about subscriptions to cloud-based services or industry-specific software that’s necessary for your business operations.

2. Vehicle Expenses (Business Mileage & Actual Vehicle Expenses)

If your business requires you to drive for meetings, deliveries, or other work-related activities, the mileage you put on your vehicle can often be written off. There are two methods to calculate vehicle expenses: the standard mileage rate or the actual expense method.

Action Plan:

• Track your business mileage carefully using a logbook or a mileage tracking app. The IRS offers a standard mileage rate, but you’ll need to decide which method yields the best deduction for you.
  
  
• Alternatively, if you use the actual expense method, keep detailed records of fuel, insurance, maintenance, and depreciation costs for your business vehicle. In this case, also keep track of the total business vs. personal mileage for the year, as this will determine what percentage of the expenses are deductible.

3. Home Office Deduction

Depending on your business structure, the home office deduction can be a significant tax break. If you use a part of your home exclusively for business, you can deduct a percentage of your home expenses, including rent/mortgage interest, utilities, and insurance.

Action Plan:

• Ensure your home office is used exclusively for business activities. You’ll need to calculate the proportion of your home used for work and apply that percentage to your home-related expenses.
  
  
• Keep records of your home office square footage and receipts for eligible expenses, like internet and phone service
  
  
• Check with your accountant on your tax filing type and whether the home office deduction can be available to you. 

4. Retirement Contributions

Contributing to a retirement plan not only helps secure your future but can also reduce your current-year taxable income. Options like a Solo 401(k) or SEP IRA allow small business owners to make substantial tax-deductible contributions.

Action Plan:

• Review how much you can contribute to your retirement plan for the year. For 2024, you can contribute up to $66,000 to a Solo 401(k), depending on your income.
  
  
• Consider making any outstanding contributions by December 31st to maximize your deduction for the current year.
  
  
• Check with your accountant on your tax filing type and whether the home office deduction can be available to you. 

5. Employee Wages and Benefits

If you have employees, wages, bonuses, and benefits (like health insurance) are deductible business expenses. Be sure to pay any outstanding wages or bonuses by year-end to ensure they count toward this year’s deductions.

Action Plan:

• Review your payroll to ensure all wages and bonuses are accounted for. Ensure these payments are processed before the year ends.
  
  
• If you offer benefits like health insurance or retirement contributions, those payments are also deductible.

6. Interest on Business Loans

If your business has any outstanding loans, the interest you pay on those loans is deductible as a business expense. This includes loans used for equipment, real estate, or working capital.

Action Plan:

• Gather records for any interest paid on loans in 2024 and ensure it’s properly categorized in your accounting system.
  
  
• Make sure you’ve paid any outstanding interest before the year ends to maximize deductions.

7. Professional Services

Fees paid to professionals like accountants, lawyers, and consultants can be deducted as business expenses. This also includes the cost of any advisory services or specialized work done to help your business grow.

Action Plan:

• Review invoices from accountants, lawyers, or other professionals to ensure you’ve captured all expenses.
  
  
• Make sure these expenses are properly categorized in your accounting software, so they are reflected at tax time.

8. Business Travel and Meals

Travel-related expenses incurred while conducting business (hotels, flights, taxis, and meals) are deductible. However, there are rules regarding how much of these expenses can be deducted.

Action Plan:

• Review your travel receipts to ensure they are properly categorized and meet IRS requirements. Only business-related travel can be deducted.
  
  
• For meals, the IRS typically allows a 50% deduction of meal costs while traveling for business.

9. Bad Debts

If your business has outstanding invoices that you don’t expect to collect, you may be able to write off those bad debts as a deduction. This can help offset taxable income if you’ve made significant sales on credit.

Action Plan:

• Review your accounts receivable and identify any debts that are unlikely to be collected.
  
  
• Ensure that these debts are properly documented and that you’ve taken reasonable steps to attempt collection.

10. Charitable Contributions

If your business has made charitable contributions, these could be deducted as well, depending on your business structure and whether you itemize deductions.. Donations to qualifying organizations are fully deductible, helping you reduce your taxable income while supporting causes you care about.

Action Plan:

• Make sure you’ve recorded all charitable donations, whether in cash or in-kind contributions (such as donating equipment).
  
  
• Verify that the charity is IRS-approved and that you have receipts or acknowledgment letters to support the deduction.

Final Thoughts

Taking advantage of these year-end deductions can significantly reduce your business's taxable income, putting you in a stronger financial position heading into the new year. While your accountant is there to guide you through the specifics, reviewing these deductions yourself and ensuring everything is documented accurately will help you maximize your tax benefits. Be proactive, plan ahead, and work closely with your accountant to ensure that you don't leave any money on the table before the year ends.