Top 7 Tax Strategies for Small Businesses to Reduce Liabilities in 2024

Proactive tax planning is the single most effective way for small business owners and freelancers to minimize federal and state tax exposure. Waiting until March or April to address your tax liability means you have missed the majority of legal reduction strategies available under the Internal Revenue Code.

1. Elect S-Corporation Status

If your LLC generates more than $50,000 to $60,000 in net income, electing S-Corp taxation via Form 2553 allows you to split revenue between a reasonable W-2 salary and owner distributions, significantly decreasing 15.3% self-employment taxes.

2. Maximize Section 179 & Bonus Depreciation

Deduct the full purchase price of qualifying equipment, vehicles, servers, and computers in the year of acquisition rather than depreciating over several years.

3. Leverage Solo 401(k) or SEP-IRA Plans

Self-employed business owners can contribute substantial pre-tax sums toward their retirement, directly offsetting top-bracket taxable income.