Some thoughts on End of the Year Tax Strategies…
I meet with my CPA at the end of each month and this month I think I should share. The year-end is where you can make pretty significant moves should the situation warrant itself.
Here are a few ideas on last-minute tax moves you can make. But you had better act fast, as time is running out!
1. Updated accounting records and income projection.
If you have been following me for a while you have heard my advice about proper record keeping, not co-mingling money and being up-to-date in your accounting. It’s so important that I decided to share some year-end tax strategies that my CPA went over with me.
By now, you should have your accounting records ready to file for next year. If that’s not you, stop reading now and grab a bottle of wine, put Christmas tunes on, and get your accounting records caught up.
When clients come to me to build wealth in real estate and they don’t have their accounting straight, it makes it difficult to send them on the right path for building wealth. With great accounting records, its easier help show them what would make the most sense. Without great accounting records, we are merely playing a guessing game. Adding properties to the mix will only be confusing and a huge RED flag to the IRS.
Knowing what your tax position is before the year is even over is an amazing benefit that your CPA can offer. But your CPA cannot help you if you don’t first help yourself.
2. Contribute to a Solo 401(k) or SDIRA.
YES, you can contribute to a Solo 401(k) as an entrepreneur.
This vehicle will allow you to max out contributions at $55,000 ($61,000 if older than 50) with your business income.
Unfortunately, you cannot contribute passive income (rental income) to Solo 401(k)s. So landlords are out of luck.
3. The new 20% deduction
Taxable income below $157,500 ($315,000 if married), your qualified business income (QBI) will qualify for a 20% deduction. If your taxable income is above those thresholds, you will start to be phased out of the 20% deduction and a deduction on business income will then be eliminated or limited.
You can talk to your CPA to help with more strategies to arrive at the desired taxable income threshold. Contributions to retirement accounts will reduce your AGI which will subsequently reduce your taxable income.
Implement Tax Savings Strategies NOW.
If you wait until April to figure out how to reduce taxes, you’re playing the tax game like an amateur. Businesses who save loads on taxes are implementing strategies throughout the year. They have their accounting records 100% updated so that they can implement strategies before the end of the year.
They most certainly do not wait until they have a tax return to battle their accountant on various expenses.
Get your CPA on the phone today!
Making it happen…
Jo Anna Wright, founder of Bottom Line Wealth