Income Timing Hacks: Slash Your Taxes in High and Low-Income Years

Small Business Tax Savings Podcast

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Are you making the most of year-end tax strategies to reduce your tax liability?

In this episode, Mike Jesowshek, CPA and owner of TaxElm, dives into essential year-end tax planning strategies for business owners, focusing on income timing, deductions, and proactive spending decisions. He explains how understanding current and projected income is key for effective tax planning, particularly for cash basis businesses. Strategies covered include prepaying expenses, delaying receipts, utilizing Roth conversions in low-income years, and taking advantage of family support tax benefits through appreciated stock transfers.

Discover how income timing, deductions, and smart spending choices can save you more as a business owner!

[00:00 - 05:08] Introduction to Tax Planning with Income Projections

• Mike Jesowshek introduces the importance of factoring in current and future income for year-end tax planning.
• He discusses the significance of strategic decisions around spending on necessary equipment.
• Effective tax planning requires knowing this year’s financial standings and projecting for the next year.

[05:08 - 10:47] Strategic Planning with Flow-Through Entities

• Flow-through entities impact tax planning based on business profit.
• Mike introduces the goal of shifting after-tax expenses into pre-tax spending.
• He advises against prepaying in low-income years when expenses may be more beneficial in higher income years.

[10:47 - 16:19] Buying Necessary Equipment for Deduction Optimization

• Mike advises only purchasing necessary equipment and aligning those purchases with high-income years for optimal tax benefits.
• He outlines how credit card spending can secure a deduction this year, even if payment occurs in the next.
• Roth conversions can be a way to maximize future tax-free growth during low-income years.

[16:19 - 19:56] Utilizing Appreciated Stock Gifting to Family Members

• Mike advises on gifting appreciated stock to family members in lower tax brackets instead of cash for tax advantages.
• He discusses limitations with children due to kiddie tax but highlights opportunities with other family members.

[19:56 - 25:19] Strategic Year-End Tax Planning

• Mike recaps key strategies for minimizing taxes legally by year-end.
• He emphasizes the importance of strategic planning and using every deduction opportunity as a business owner.

Direct Quotes:

"We always want to take advantage of what’s available to you." - Mike Jesowshek, CPA

“A Roth account grows tax-free and withdrawals are tax-free—that’s a beautiful thing.” - Mike Jesowshek, CPA

“The IRS loves business owners; they create jobs, employ people, and grow the economy.” - Mike Jesowshek, CPA

Check out this episode’s blog post: What Year End Strategies Are Available to Business Owners

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join TaxElm: https://taxelm.com/

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