Black Friday Tax Savings can extend beyond just great holiday deals—they can also play a role in reducing your tax burden. Whether you’re a business owner stocking up on supplies or an individual taking advantage of discounts on big-ticket items, strategic purchases made during Black Friday can help you save come tax season. From deductible business expenses to tax-efficient holiday giving, understanding how to align your spending with tax strategies is key to maximizing your financial benefits.
Here’s how you can plan ahead and potentially reduce your tax liabilities with some well-timed spending and financial decisions:
Charitable Donations: Give and Receive
If you’re feeling charitable this holiday season, your donations can do more than just help those in need—they can also help you save on taxes. Contributions to qualified charitable organizations are tax-deductible, provided you itemize deductions on your tax return. Black Friday is a great time to make those last-minute donations, ensuring they are eligible for deductions for the current tax year.
To maximize your savings:
- Donate cash or appreciated assets (such as stocks or property) to qualified 501(c)(3) organizations.
- Ensure you receive proper documentation for any contribution of $250 or more.
- Consider bunching donations (making larger donations in one year) to surpass the standard deduction and itemize for tax benefits.
BONUS READ: Check out our eBooks on how you can maximize your personal and business tax savings.
Take Advantage of Section 179 for Business Equipment
For business owners, Black Friday deals on equipment, technology, and office supplies can lead to significant tax savings. The IRS allows businesses to deduct the full purchase price of qualifying equipment and software through Section 179 of the tax code. This means that instead of depreciating the cost of equipment over several years, you can deduct it all in the year it was purchased—if you buy and use the equipment by December 31.
Here’s how to maximize this opportunity:
- Plan ahead for big-ticket purchases: Computers, furniture, machinery, and even vehicles can qualify.
- Take advantage of Black Friday deals to stretch your budget further.
- Ensure that the total amount you deduct doesn’t exceed the Section 179 cap for the year, which in 2024 is $1,160,000.
Prepay Business Expenses to Reduce Taxable Income
Another tax-saving strategy is to prepay business expenses for the upcoming year before December 31. If your business uses the cash method of accounting, you can deduct these expenses in the current year, reducing your taxable income. Prepaying for office supplies, rent, insurance, or other recurring expenses is a smart way to take advantage of Black Friday discounts and save on taxes at the same time.
Tips for using this strategy:
- Focus on expenses you know your business will incur in the next year.
- Review cash flow to ensure you have enough liquidity to prepay without straining operations.
- Keep proper records of prepayments for tax purposes.
Maximize Retirement Contributions
Contributing to retirement accounts is a tried-and-true method of reducing taxable income. Whether it’s an IRA, 401(k), or SEP IRA, maximizing contributions before the end of the year is one of the most effective ways to save on taxes. While the contribution deadline for IRAs isn’t until tax day (April 15), employer-sponsored plans like 401(k)s require contributions by December 31.
Here’s how to optimize retirement savings:
- For 2024, you can contribute up to $22,500 to a 401(k) (with an additional $7,500 catch-up contribution if you’re 50 or older).
- Contributions to Traditional IRAs and SEP IRAs are tax-deductible, lowering your taxable income.
- Take advantage of any employer match to further boost your retirement savings at no additional cost.
Evaluate Tax-Loss Harvesting
For investors, the end of the year offers an opportunity to offset capital gains with capital losses through a process called tax-loss harvesting. If some of your investments have underperformed, you can sell them to realize a loss, which can offset any capital gains you’ve made during the year and reduce your overall tax liability.
To use tax-loss harvesting effectively:
- Identify poorly performing investments and weigh the tax benefits of selling versus holding.
- You can offset up to $3,000 of ordinary income with capital losses each year, and any remaining losses can be carried forward to future years.
- Avoid the wash-sale rule, which prevents you from claiming a tax deduction if you repurchase the same security within 30 days.
Plan Now, Save Later
Black Friday may be a shopping frenzy for most, but it can also be the perfect time to review your finances and implement strategies that will lead to substantial tax savings. Whether it’s through strategic business spending, charitable donations, or maximizing retirement contributions, planning ahead will ensure you reap the financial rewards when tax season rolls around.
Remember, tax planning is an ongoing process, and with some foresight and smart financial decisions, you can use the IRS’s rules to your advantage—just like a Black Friday deal!
Email us at info@axiomtax.cpa, call (813) 977-0089 or book a confidential meeting with us to help you take advantage of the deals and the remaining weeks of the year to optimize your tax position and set yourself or your business up for success in the coming year.
