My smartest clients are always thinking about the future. And the smartest accountants I know urge their clients to plan their taxes ahead of time. With two months left until 2024, here are some tax measures to consider that could save you money.

Maximize your retirement plans

Mitchell Gerstein, CPA and Senior Tax Advisor at Bala Cynwyd’s Isdaner & Co.recommends taking maximum retirement plan contributions whenever possible. Some plans to consider, he said, are a simplified employee pension (SEP-IRA), profit sharing or a 401(k).

He INSURANCE Law 2.0 offers generous tax credits to help eligible employers establish new retirement plans and help offset the cost of matching their employees’ contributions.

“Retirement plans can be a powerful tax-saving tool for both business owners and employees,” Gerstein says.

The maximum 401(k) contribution this year is the lesser of $23,000 or 100% of the business owner’s compensation, with an additional $7,500 catch-up contribution for those age 50 and older.

Business owners implementing a 401(k) plan should also be aware of nondiscrimination testing requirements, which ensure that highly compensated employees are not unfairly favored by the employer’s retirement plan.

SEP-IRA and profit-sharing plan contributions can be up to $69,000 or 100% of the participant’s compensation.

Contribute more to health insurance

Health insurance costs are expected to rise up to 9% next year. But Ray Minich, a certified public accountant based in Doylestown, says you may be able to use this increase to save on taxes. He recommends contributing as much as possible to your employees’ group health insurance plan, which can reduce payroll and Medicare taxes for the employer and employee.

“So instead of giving an employee a raise, you should invest more in their health insurance contribution,” he said.

Buy capital goods before the end of the year

Although the deduction has decreased since the expiration of the Tax Cuts and Jobs Act of 2017, there are still important opportunities to write off the cost of your business’s capital expenses.

Businesses can deduct the value of a purchase in the year it was put into service, that is, when it is first available for use. For 2024, the limit is $1.22 million, with a phaseout starting at $3.05 million on qualified equipment. Bonus depreciation, which can be applied after reaching that deduction limit, allows businesses to deduct 60% of the cost of qualified assets in 2024.

“These are powerful tax-saving tools for small and medium-sized businesses, allowing them to invest in the equipment and technology needed to grow without waiting to realize the full tax benefits,” Gerstein said.

Pay your estimated taxes on time

One thing that always frustrates accountants is when clients don’t pay their estimated taxes on time.

“There are people who come here and write a check on April 15 with their spread for their entire tax bill and wonder why they got a $10,000 fine,” Minich said. “That penalty is like taking dollar bills, putting them on the grill outside and burning them.”

You are responsible for paying 110% of the previous year’s taxes or 90% of the current year’s taxes.

Take Advantage of the Inflation Reduction Law

According to Gerstein, the Inflation Reduction Act and other recent laws provide tax credits for the installation of energy-efficient equipment, renewable energy sources and sustainable building practices. It also includes tax credits for fleet purchases of new and used electric vehicles, he noted.

The law also provides a tax deduction to companies that make energy-efficient improvements to commercial properties. Deductions of up to $5 per square foot are available for energy efficiency improvements that reduce energy use by at least 50%.

Become an intermediary

Businesses that are currently sole proprietors (where they report their income on a schedule on their individual tax return) may benefit from converting to a pass-through entity like an S corporation or partnership, Minich says. Passing entities can save by using the qualified business income deductionhe said, although it could expire at the end of 2025.

“You may be able to reduce your self-employment taxes and take advantage of additional business deductions for your wages and those of your employees,” he said.

Take a closer look at vehicle expenses.

Many companies choose to take the standard mileage rate of 67 cents per mile as a tax deduction, but Gerstein says larger deductions may be available. Business owners should consider the actual expenses of vehicles used for business purposes, such as gas, repairs, maintenance, depreciation, and insurance.

“Remember to keep detailed records of mileage, dates and your business purposes for each trip,” he said. “Choose the method that provides the largest deduction.”

But, Gerstein noted, if a company uses the actual expense method one year, it must use that method for that specific vehicle each following year.

Reallocate earnings

If you own your business with your spouse, take a close look at how you allocate your profits. If one owner can report more of the compensation than the other, Minich says, the company could reduce its employment taxes once a compensation threshold is reached. And there are future benefits too.

“Suppose there is a husband and wife who jointly own a business that makes $120,000 a year,” he said. “If you can allocate more income to one person than another, that could increase that person’s Social Security income in the future.”