Year-end tax planning is always important, but the stakes for 2024 are particularly high. With the TCJA set to expire after 2025, many of the tax provisions that business owners have relied on for the past several years may look very different in 2026. The decisions made before December 31, 2024, can affect not only this year's tax bill but also the positioning for whatever tax landscape emerges in the next Congress.[1]
Accelerate Deductions, Consider Deferring Income
The traditional year-end strategy of accelerating deductions into the current year remains sound for most taxpayers. Prepaying state and local taxes (to the extent beneficial under the $10,000 SALT cap), making deductible retirement plan contributions, and timing discretionary business expenses to fall before year-end can reduce 2024 taxable income. For taxpayers who expect to be in a higher bracket in 2026 (if the TCJA sunsets), deferring income recognition into 2025 or later may be appropriate — though this analysis is complicated by the uncertainty about what Congress will do.
Maximize Retirement Plan Contributions
The 2024 contribution limits — $23,000 for 401(k) deferrals, $69,000 for total defined contribution additions, $7,000 for IRAs — should be fully utilized before year-end. For business owners who have not yet established a retirement plan, a SEP IRA can be established and funded as late as the due date of the tax return (including extensions). A solo 401(k) can be established by December 31 to allow employee deferrals for 2024, with employer contributions made by the return due date.[2]
Roth Conversions: A Potentially Narrowing Window
If the TCJA sunsets and individual rates increase in 2026, Roth conversions done in 2024 and 2025 will prove to have been at a bargain rate. Converting traditional IRA assets to Roth at the current 37 percent top rate looks favorable if the top rate reverts to 39.6 percent (or higher). For taxpayers in lower brackets — particularly retirees with moderate income — the case for Roth conversion is even stronger. The conversion is taxed as ordinary income in the year of conversion, but all future growth in the Roth account is tax-free, and Roth IRAs have no required minimum distributions during the owner's lifetime.
Capital Gain and Loss Harvesting
Taxpayers with investment portfolios should review their unrealized gains and losses before year-end. Harvesting capital losses to offset capital gains reduces the net capital gains tax. Losses in excess of gains can offset up to $3,000 of ordinary income, with any remainder carried forward. Conversely, taxpayers who expect to be in a lower bracket in 2024 than in future years may want to recognize gains now at the lower rate.
The wash sale rule prevents taxpayers from deducting a loss on a security if they purchase a substantially identical security within 30 days before or after the sale. Taxpayers who want to maintain their investment position while harvesting losses should wait 31 days before repurchasing, or purchase a similar (but not substantially identical) security.
Bonus Depreciation at 60 Percent
Bonus depreciation continues to phase down under the TCJA schedule. For property placed in service in 2024, the bonus depreciation rate is 60 percent (down from 80 percent in 2023). Business owners planning significant equipment purchases or other capital expenditures should evaluate whether accelerating those purchases into 2024 to capture the 60 percent deduction is more advantageous than waiting for 2025 (when the rate drops to 40 percent) or relying on Section 179 expensing.[3]
Charitable Giving Strategies
For taxpayers who itemize, charitable contributions remain deductible up to 60 percent of adjusted gross income for cash gifts and 30 percent for gifts of appreciated property. The TCJA's higher standard deduction means many taxpayers no longer itemize in every year. A bunching strategy — concentrating two or more years of charitable gifts into a single year to exceed the standard deduction threshold — can maximize the tax benefit. Donor-advised funds are a convenient vehicle for bunching: the taxpayer makes a large contribution to the fund in one year (claiming the deduction) and then directs grants to charities over subsequent years.
Section 199A Planning
The Section 199A qualified business income deduction provides up to a 20 percent deduction on pass-through business income. For 2024, the deduction is fully available for taxable income below $191,950 (single) or $383,900 (married filing jointly). Above those thresholds, the deduction may be limited based on W-2 wages paid by the business, the unadjusted basis of qualified property, or the type of business (specified service businesses face a complete phase-out at higher income levels). Business owners should review whether adjusting their compensation, timing of income, or business structure could improve their 199A position.[4]
The Bigger Picture
The overriding theme of 2024 year-end planning is uncertainty. The TCJA sunset looms over every planning decision, and the political environment makes predictions unreliable. The best approach is to take advantage of the provisions that are available now — the current rates, the current exemptions, the current deductions — while maintaining flexibility to adjust as the legislative picture becomes clearer in 2025.