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June 10, 2024 Focus | Wealth Management

Tax planning tips for executives and business owners

James Zahansky
By James Zahansky

It’s crucial for executives and business owners to proactively plan and strategize to minimize their tax liabilities.

By implementing effective tax planning strategies, you can potentially save thousands of dollars and maximize your financial resources. Here are some top tax-saving tips that executives and business owners should consider for the upcoming tax year.

1. Maximize retirement contributions

One of the most effective ways to reduce your taxable income is to maximize contributions to tax-advantaged retirement plans.

As an executive or business owner, you have access to various retirement savings options, including 401(k) plans, traditional IRAs and defined benefit plans. These contributions are typically tax-deductible, lowering your overall taxable income for the year.

2. Leverage business deductions

Running a business comes with numerous expenses, many of which may be tax-deductible.

Ensure you are taking advantage of all eligible deductions related to your business expenses, such as travel, meals and entertainment (subject to limitations), home office expenses, vehicle expenses and other business-related costs.

Properly documenting and deducting these expenses can significantly reduce your tax burden.

3. Establish an accountable plan

Implementing an accountable plan for reimbursing employee business expenses can provide tax benefits for both you and your employees.

Under an accountable plan, you can deduct these expenses as a business owner while keeping them tax-free for your employees, creating a win-win situation.

4. Explore tax credits

Various tax credits are available to businesses, such as the research and development (R&D) tax credit, work opportunity tax credit or industry-specific credits. These credits can directly reduce your tax liability, making it essential to understand and take advantage of any credits that apply to your business.

5. Time income and expenses strategically

Carefully timing the recognition of income and expenses can be a powerful tax planning strategy.

By shifting income or expenses into a more favorable tax year, you may be able to capitalize on expected changes in income or tax rates, potentially reducing your overall tax liability.

6. Implement tax-efficient investment strategies

Develop tax-efficient investment strategies tailored to your unique circumstances. Techniques such as tax-loss harvesting, maximizing qualified dividends and long-term capital gains, and utilizing tax-advantaged accounts like 529 plans or health savings accounts (HSAs) can help minimize your tax burden while growing your wealth.

7. Evaluate business structure

The structure of your business (e.g., sole proprietorship, partnership, corporation) can have significant tax implications. Determine whether a different business structure could provide tax advantages based on your specific circumstances and goals.

8. Defer compensation

If you are an executive or highly compensated employee, exploring opportunities to defer a portion of your compensation to future tax years when you may be in a lower tax bracket can potentially result in substantial tax savings.

9. Make charitable contributions

Charitable contributions, whether in cash or appreciated assets, can provide valuable tax deductions while supporting causes you care about. Additionally, donating appreciated assets can help you avoid paying capital gains taxes on the appreciation.

10. Implement estate planning strategies

As an executive or business owner, it’s essential to have a comprehensive estate plan in place.

Implementing strategies such as trusts, gifting or other techniques can help minimize potential estate and gift taxes, ensuring your wealth is preserved and transferred efficiently to your intended beneficiaries.

James Zahansky is a principal/managing partner, investment advisor and chief goals strategist at wealth management firm Weiss, Hale & Zahansky Strategic Wealth Advisors. This column is general in nature and does not address a specific situation. For specific investment needs, please discuss individual circumstances with your representative. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in this column should be construed as specific tax or legal advice.

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