Smart Small Business Purchases Before 2024
Updated for the
tax years in 2024. Small businesses, it’s now time to add more items to your holiday shopping list. Timing is key for small businesses to save money on taxes.
The last quarter of the year is a great time for business owners to make tax-deductible purchases to reduce their tax liability. Knowing when to make business expenses can have an impact on your bottom-line, especially when it’s time to pay your income tax bill to the IRS. We’re here to help answer these questions and more. We’re here to help answer these questions and more.
At a glance
End-of-year business purchases can help reduce your
taxable income.
Consider buying before year-end if your
- business income was unusually high this
- tax year or if you’ve been delaying essential expenses.Avoid unnecessary spending — focus on purchases that will genuinely benefit your business.What can I purchase for a small business tax deduction?You can write off a variety of small business expenses on your tax return, including travel expenses, subscriptions, supplies, and business insurance premiums. As long as they were purchased for business purposes, they’re typically fair game.
- Eligible deductions also include equipment purchases under Section 179. The Section 179 deduction, unlike bonus depreciation allows small businesses to immediately write-off the full purchase price for qualifying equipment or software up to $1,220,000 in tax year 2024. Taking advantage of Section 179 can help you lower your taxable income and your tax bill significantly.
Other deductions include health insurance, home office expenses, and bookkeeping tools for business use. If you need more ideas, check out our ultimate list of business tax deductions for small business owners.
Should I purchase now or wait until next year?
Timing your business expenses can make a difference in reducing your tax bill. We’ll look at when you should buy before year-end.
Your income was higher this year.
Buying before year-end can help you reduce your taxable income. This is important if you are at risk of moving up a tax bracket. You’ve been putting it off.
If you’ve been putting it off, like replacing old equipment or doing property repairs, now may be the best time to make this investment. If you have a tight budget, you may want to delay non-essential purchases to next year. You don’t want to stretch your resources too thin — reducing your taxable income shouldn’t come at the expense of financial stability.
You don’t need anything right now.
- It’s not usually a good idea to make purchases simply to get a tax deduction. If you don’t need anything else for your business, consider saving your funds for future expenses that will have a real impact on your operations.
Other ways to save on small business taxes - If you have extra business income this year but don’t want to make unnecessary purchases, there are still ways to reduce your taxable income and save on federal taxes. Here are some tax planning ideas to consider:
Contribute to a retirement plan:
Contributions to a retirement account like a SEP IRA or traditional IRA can help reduce your taxable income. Small business owners may also benefit from setting up a retirement plan for their employees.
- Pay January’s bills early:
If your business has upcoming bills — such as insurance premiums or subscriptions — you can always pay them before the end of the year to maximize your business tax deductions. - Delay invoices:
Depending on your accounting method, delaying invoices until the end of the year can push taxable business income into next year, potentially lowering your current year’s tax bill.
Make necessary small business purchases before the end of the year.
If your business could benefit from new equipment, supplies, or other eligible business expenses, December is the perfect time to make those investments. You can also reduce your income taxes by making necessary small business purchases before the end of the year. They can help you navigate the tax laws and maximize your small-business tax benefits. Making smart purchases before the year’s end can help you save money and reduce your overall tax liability. We have more tax tips and guides for small business owners, entrepreneurs, and self-employed individuals. We’ve got you covered with more tax tips and guides for small business owners, entrepreneurs, and self-employed individuals.
- And if you’re ready to get tax filing over with, TaxAct Business is ready and waiting to help make the tax preparation process as painless as possible.This article is for informational purposes only and not intended as legal or financial advice.
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