Year-End Tax Planning for Phoenix Businesses: What You Need to Know About 2024 Taxes

With the new year, Phoenix businesses have a unique opportunity to implement tax-saving strategies. Proactive planning can reduce your tax liability, ensure compliance and position your business for financial success in the upcoming year. The right strategies depend on your specific business structure, goals and financial standing, but some universal tactics can benefit businesses across industries.

Take Advantage of Section 179 and Bonus Depreciation

Businesses planning significant investments in equipment, machinery or technology upgrades can benefit from Section 179 deductions and bonus depreciation rules.

• Section 179 Deduction: This allows businesses to deduct the full cost of qualifying equipment or software purchased or financed during the tax year, rather than depreciating it over several years.
  
  
• Bonus Depreciation: For qualifying assets not covered by Section 179, bonus depreciation lets businesses deduct a large percentage of the cost upfront.

Before making large purchases, consult with a business tax professional to ensure the timing and classification of expenses align with your tax planning strategy.

Review Your Entity Structure

Your business’s legal structure significantly impacts your tax obligations. For instance:

• S Corporations and LLCs often benefit from pass-through taxation.
  
  
• C Corporations are subject to corporate tax rates but may take advantage of unique deductions.

If your business has grown or its needs have shifted, now is the time to evaluate whether your current entity structure is still the most tax-efficient option for 2024 filing.

Defer or Accelerate Income and Expenses

Depending on your anticipated income for the year, you may benefit from deferring or accelerating income and expenses.

If you expect a lower tax rate next year, defer income until January 2025 and accelerate deductible expenses into the next year. If you expect higher profits next year, accelerate income to take advantage of your current lower tax rate and defer expenses until 2025.

Maximize Retirement Contributions

Contributing to employee retirement plans, such as a 401(k) or SEP IRA, not only benefits your team but also reduces your taxable income. Employers can claim tax deductions for contributions made to these plans, while employees enjoy tax-deferred growth on their contributions.

Claim Tax Credits

Tax credits directly reduce your tax liability dollar-for-dollar, making them more valuable than deductions. Review available federal and Arizona-specific tax credits, such as:

• Research and Development (R&D) Credit: For businesses investing in innovation, product development or process improvements.
  
  
• Work Opportunity Tax Credit (WOTC): For hiring employees from specific target groups, such as veterans or individuals receiving government assistance.
  
  
• Arizona Enterprise Zone Program Credits: For businesses operating in certain areas and hiring employees from designated zones.

Clean Up Your Financial Records

Accurate financial records are essential for effective tax planning and preparation. Use the year-end as an opportunity to:

• Reconcile your accounts
• Review outstanding invoices and payables
• Identify and write off bad debts

A clean set of books not only simplifies tax filing but also helps identify potential deductions and opportunities for savings.

Evaluate Inventory and Cost of Goods Sold (COGS)

If your business holds inventory, review your inventory levels and cost of goods sold to determine the best tax strategy. Businesses can write down unsellable or obsolete inventory as a deduction. Additionally, consider whether the LIFO (Last In, First Out) or FIFO (First In, First Out) accounting method is more advantageous for your tax position.

Utilize Arizona State-Specific Incentives

Arizona offers unique tax-saving opportunities that can benefit Phoenix-based businesses, including:

• Arizona Charitable Tax Credit: Contributions to qualifying charitable organizations can offset your Arizona state tax liability.
  
  
• Solar Energy Tax Incentives: Businesses that install solar energy systems may qualify for federal and state tax credits.



These incentives align with Arizona’s goal of promoting community development and environmental sustainability while offering financial benefits to businesses.

Plan for Estimated Taxes

Small businesses, freelancers and self-employed professionals typically need to make quarterly estimated tax payments. Although it can be difficult, it is necessary to ballpark your expected income for the year by the end of the first quarter. Review your previous year’s income and your own projections to ensure you’re paying enough to avoid penalties. Although overpaying isn’t ideal, it’s better than being penalized for underpaying, and anything you overpay earlier in the year will be refunded. 

Consult a Professional Accountant

Tax laws are complex and change frequently. The best way to ensure compliance, maximize deductions and minimize liabilities is by partnering with experienced business accountants and tax preparers who understand local and federal tax codes.

Plan Ahead with Top-Notch Accounting Services in Phoenix

Year-end tax planning doesn’t have to be overwhelming. With expert advice and proactive strategies, you can take control of your taxes, save money and prepare for a successful new year.

Contact H&H Accounting Services today at (480) 561-5805 to schedule your tax planning consultation.