The deadlines for filing 2024 tax returns (or extensions) are fast approaching. Has your small business taken advantage of all the legitimate ways to lower its federal income tax bill for 2024? Fortunately, it may not be too late to make some tax-smart moves for last year.

Here are five last-minute tax breaks that may benefit business owners and strategies to optimize your tax results for 2024. These breaks may be available to the following types of entities:

• C corporations,
• Sole proprietorships,
• Single-member limited liability companies (LLCs) treated as sole proprietorships for tax purposes, and
• Pass-through entities, including partnerships, LLCs treated as partnerships for tax purposes and S corporations.

1. QBI Deductions

The deduction based on qualified business income (QBI) was a key element of the Tax Cuts and Jobs Act. This break is available to individual owners of sole proprietorships, single-member LLCs treated as sole proprietorships for tax purposes and pass-through entities. Estates and trusts that own these types of businesses are also eligible for the QBI deduction.

For tax years through 2025, the deduction can be up to 20% of the owner’s QBI. It’s subject to restrictions that can apply:

• At higher income levels, and
• Based on the owner’s taxable income.

It’s important to remember that the QBI deduction can also be claimed for up to 20% of income from qualified real estate investment trust dividends and up to 20% of qualified income from publicly traded partnerships.

Because of the income limitations on this deduction, other last-minute tax planning moves may inadvertently increase or decrease your allowable QBI deduction. For instance, claiming big first-year depreciation deductions or making deductible retirement plan contributions (discussed below) can reduce QBI and lower your allowable QBI deduction. Work with your tax advisor to get the best overall tax results by making the right moves on your 2024 business return or forms.

2. Section 179 First-Year Depreciation Breaks

The first-year Section 179 depreciation deduction privilege allows many small businesses to write off the full cost of some or all of their 2024 depreciable asset additions on their 2024 federal income tax returns. For tax years beginning in 2024, the maximum Sec. 179 deduction is $1.22 million.

Eligible assets include:

• Depreciable personal property, such as equipment, computer hardware and peripherals,
• Transportation equipment, including certain passenger vehicles, and
• Commercially available software.

Sec. 179 deductions can also be claimed for real estate qualified improvement property (QIP) up to the maximum allowance of $1.22 million. QIP is defined as an improvement to an interior portion of a nonresidential building placed in service after the date the building was placed in service. However, expenditures attributable to the enlargement of a building, elevators or escalators, or the internal structural framework of a building don’t count as QIP and usually must be depreciated over 39 years. There’s no separate Sec. 179 deduction limit for QIP. These deductions reduce your maximum Sec. 179 deduction dollar for dollar.

For nonresidential real property, Sec. 179 deductions are also allowed for qualified expenditures for:

• Roofs,
• HVAC equipment,
• Fire protection and alarm systems, and
• Security systems.

Finally, eligible assets include depreciable personal property used predominantly to furnish lodging, such as furniture and appliances in a property rented to transients.

Important: A phaseout rule kicks in if you put more than $3.05 million of qualifying assets into service last year. In addition, Sec. 179 deductions can’t cause an overall business tax loss. The Sec. 179 deduction limitation rules can be tricky if you own an interest in a pass-through business entity.

3. First-Year Bonus Depreciation Deductions

Depreciable assets that can’t be written off in 2024 under the Sec. 179 deduction rules may qualify for first-year bonus depreciation deductions. Specifically, 60% first-year bonus depreciation can be claimed for qualified assets that were placed in service in calendar year 2024.

Important: The limitations to Sec. 179 deductions don’t apply to first-year bonus depreciation deductions.

Eligible assets for first-year bonus depreciation include:

• Depreciable personal property, such as equipment, computer hardware and peripherals,
• Transportation equipment, including certain passenger vehicles, and
• Commercially available software.

First-year bonus depreciation can also be claimed for real estate QIP.

The first-year bonus depreciation percentage is scheduled to drop to 40% for qualified assets placed in service in calendar-year 2025, unless Congress passes legislation to change the bonus depreciation rules. There’s also a possibility that Congress will reinstate 100% first-year bonus depreciation for 2025. Contact your tax advisor for the latest developments on this potentially valuable tax break.

4. Tax-Favored Retirement Plans

If your business doesn’t already have a tax-favored retirement plan, now might be the time to take the plunge. Current rules allow for significant annual deductible contributions.

For example, you can set up a Simplified Employee Pension (SEP) IRA if you’re self-employed. Then, you can contribute up to 20% of your net self-employment income, with a maximum contribution of up to $69,000 for your 2024 tax year. If you’re employed by your own corporation, you can contribute up to 25% of your salary, with a maximum contribution of up to $69,000. If you’re self-employed and in the 32% federal income tax bracket, making a maximum contribution could cut what you owe Uncle Sam for 2024 by a whopping $22,080 ($69,000 times 32%). If you’re employed by your own C corporation, a company contribution of $69,000 to your account could cut your company’s tax bill by $14,490 ($69,000 times 21%).

Other small business retirement plan options include:

• 401(k) plans and solo 401(k)s that are set up for just one person,
• Self-employed defined contribution Keogh plans,
• Corporate defined contribution profit-sharing plans,
• Defined benefit pension plans, and
• Savings Incentive Match Plans for Employees (SIMPLE) IRAs.

Depending on your circumstances, these plans may allow bigger deductible contributions and/or more flexibility than a SEP-IRA.

Important: Your business can adopt a tax-favored retirement plan and fund it as late as the due date (including any extension) of its federal income tax return for the plan adoption year. The plan can then receive deductible contributions made by that due date. (See “Tax Filing Deadlines for 2024” below.)

For instance, if you extend your 2024 personal tax return and operate a calendar-year sole proprietorship or single-member LLC that’s treated as a sole proprietorship for federal tax purposes, you have until October 15, 2025, to establish a plan and make the initial deductible contribution.

There’s a critical exception, however. To make a SIMPLE IRA contribution for the 2024 tax year, you must have set up the plan by October 1, 2024. So, it’s too late to use that option for 2024.

5. Business Casualty Loss Deductions

If your business has already been affected by a federally declared disaster in 2025 (such as the recent California wildfires) or is hit with another federally declared disaster that happens later this year, you can claim a deduction for an uninsured business casualty loss. You can elect to deduct qualifying losses from 2025 on your business’s 2024 return instead of waiting to deduct it for the 2025 tax year.

Choosing this option may allow you to get tax relief sooner. Plus, if your 2024 income is lower than your 2025 income, claiming the loss in 2024 can also result in a bigger deduction.

For More Ideas

These are just five last-minute tax-saving maneuvers that small business owners may be able to make before Tax Day. As always, your tax professional can advise you on the optimal tax-saving strategies for your situation.

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Tax Filing Deadlines for 2024

The federal income tax filing deadline for 2024 personal returns is April 15, 2025. This deadline also applies to reporting income from sole proprietorships and limited liability companies (LLCs) treated as sole proprietorships for tax purposes. Income from these businesses is generally reported on Schedule C, E or F of the owner’s personal return.

The tax filing deadlines for other calendar-year businesses are as follows:

• March 17, 2025, for pass-through entities, including partnerships, LLCs treated as partnerships for tax purposes and S corporations, and
• April 15, 2025, for C corporations.

If you need more time to file your return, contact your tax advisor about obtaining an automatic six-month extension. However, beware: The extension only grants more time to file, not to pay taxes owed. A reasonable estimate of any remaining tax due must be paid by the original (unextended) due date to avoid possible penalties and interest.