2024 Tax Season Guide on New Tax Credits, Deductions for Small Businesses

By Annie Stephan Feb 21, 2024 11:03 PM EST

Every year brings many changes to tax legislation, and for the 2024 tax season, small business owners have critical updates to assess. Keeping abreast of these changes is vital. Staying compliant can offer ways to lower your tax liability, especially concerning legal reporting requirements.

(Photo : Unsplash/ Rod Long)

Fundamental Changes Affecting Small Business Taxation

Elevating Employer Pension Startup Credit

A significant shift from the SECURE Act 2.0 could impact businesses offering retirement plans. From the 2023 tax year, the startup credit for small employers regarding pension plans is boosting notably. We're witnessing an increase from 50% to 100% of administrative costs for those with up to 50 employees, cementing the first three years of the new plan's operation as especially advantageous.

Boost in Employer Retirement Contribution Credits

On the back of the increased startup credit, there's a bonus for small businesses playing active roles in their employees' retirement savings. Employers with 101 workers can avail an extra credit- a slice of contributions to their staff's retirement accounts, capping at $1,000 per employee.

The Inclusion of Student Loan Payments in Retirement Planning

The tax frontier extends to student loans as well. The latest SECURE Act 2.0 provisions offer employers an edge in assisting employees with student loans. Employers can now make student loan repayments that count as matching retirement contributions. This strategy is designed to aid workers struggling to save for retirement due to existing loan obligations.

Potentially Game-Changing Tax Amendments

Holding on to 100% Bonus Depreciation

The prospective Tax Relief for American Workers and Families Act could shift the terrain significantly regarding asset depreciation. While it's not yet set in stone, this act passed by the House on January 31, 2024, seeks to uphold the 100% bonus depreciation through 2025- a boon for businesses, particularly those rooted in real estate investment.

R&D Deduction Expansion

Small business owners keen on innovation may find reason to rejoice if the proposed Tax Relief for American Workers and Families Act passes. It promises an upgrade in R&D tax deductions, permitting companies to write off full investments in U.S. research and development in the tax year they're incurred, not spread over time. However, this aspect of the new bill is on hold in the Senate, leaving taxpayers uncertain as the traditional April 15 deadline approaches.

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Proactive Measures and Strategic Planning

It's not just about understanding the current rules; it's about preparation for what might come. Tax strategy requires forward-thinking, potentially holding off on filings or considering an extension until the legislative air clears.

Remember, extensions permit additional time to file, not to pay. The mid-April cutoff still expects taxes due to avoid penalties and interest.

Note on the Tax Relief for American Workers and Families Act

The new act isn't exclusively positive. It imposed a cut-off for the Employee Retention Tax Credit claims, which had to be in by January 31, 2024. Businesses that haven't claimed might have just missed the train, underscoring the essence of timeliness in tax matters.

The Essence of Vigilance

For small business owners, keeping a pulse on these developments isn't just good practice- it's essential stewardship of your enterprise. Engage with tax professionals, analyze your business structure, and understand how these shifts align with your fiscal strategies. Whether leveraging deductions, optimizing for credits, or planning for potential legislative changes, your proactive engagement can make all the difference as you navigate the complexities of the tax season.

Stay Informed and Prepared

With the tax landscape for small businesses taking new turns, preparedness is the hallmark of sagacious management. The 2024 tax season ushers in both opportunities and challenges. Small business owners must remain informed and consult with tax experts to harness the changes effectively, ensuring a robust and compliant fiscal operation.

Remember, knowing these changes today can result in a better-managed tomorrow for your business' finances.