Imagine you’re cruising down a winding road, enjoying the thrill of the journey. Most people, though, are fixated on their rearview mirror, focused on what’s already behind them. When it comes to taxes, it’s no different. They filed their taxes once a year, recording past transactions and missed opportunities.

But picture this: you’re sitting in the driver’s seat, peering through the expansive windshield, eyes fixed on the road ahead. You’re engaged in proactive tax planning, a thrilling endeavor that allows you to anticipate twists and turns, avoiding treacherous pitfalls that could cost you a fortune in taxes.

Now, here’s the kicker: the more successful your business becomes, the more crucial proactive tax planning becomes. It’s like driving a high-performance sports car. The faster you go, the more skill you need to navigate the complexities of the tax landscape. Yet, ironically, success often steals your precious time, making it harder to delve into proactive tax planning.

Don’t you worry! We’re about to unveil four secret areas that can help you keep more of your hard-earned money each year.

These strategic insights will turbocharge your tax savings, giving you the edge you need to conquer the road ahead. So, buckle up, embrace the thrill, and let’s dive into the exhilarating world of proactive tax planning. Your wallet will thank you!

• Maximize the Tax Deductions

Imagine this scenario: you’re considering purchasing a shiny new tractor for your business. You’ve heard rumors that it could potentially lead to a significant tax deduction. But here’s the catch: would investing all that money in a tractor actually benefits your business in a substantial way? Most likely not.

Let’s face it: spending a dollar to get 50 cents back doesn’t sound like a smart move. Even if you’re a successful business owner in the highest income tax brackets, taking advantage of a tax deduction often results in a mere fraction of your initial investment being returned to you, if anything at all.

So, it’s crucial to approach your business expenses wisely. You want to ensure that every dollar you spend serves a purpose and contributes to the smooth operation and growth of your business. Don’t be swayed by the allure of potential tax deductions if they don’t align with your genuine business needs.

By making prudent choices and investing in essential resources, you’ll not only avoid wasting your hard-earned money but also set a solid foundation for your business’s success. So, think twice before splurging on that flashy item just for the sake of a tax deduction. Your business deserves a strategic approach that maximizes value and minimizes unnecessary expenses.

• Pass the Entity Tax Strategy

I recently sent out a reminder to California business owners with S-Corporations about the pass-through entity tax payment (PTET). Some of the responses from their tax preparers were quite alarming. Some asked why they should pay an optional tax, while others didn’t even know about the PTET strategy. It’s concerning when your tax professional isn’t aware of potential tax-saving opportunities.

Around 32 states, including California, have a PTET tax benefit to help bypass the $10,000 state and local tax deduction cap. This cap hits hard in high-income, high-tax states like California, New York, and New Jersey.

If you have a substantial income and pay significant state taxes, the PTET tax election could be highly advantageous for you. The deadline for making a California PTET election for 2023 is June 15.

• Optimize the Profit-Sharing Plan

Contributing to a 401(k) plan offers dual benefits: securing your retirement and reducing your tax burden as a business owner. By optimizing your 401(k) plan, you can make the most of tax advantages and potentially contribute up to $66,000 (or $73,500 if you’re 50 or older) pre-tax through a profit-sharing plan.

Surprisingly, many business owners have 401(k) plans that are not fully optimized to maximize tax benefits. That’s where a tax planning-focused financial advisor can make a significant difference. By consulting with them, you can explore ways to enhance your 401(k) plan, allowing for larger contributions and substantial tax savings.

Don’t settle for a financial advisor who ignores tax planning. Find an expert who can help you minimize taxes and maximize savings. Leaving tax optimization unaddressed means leaving money on the table. Make the switch and secure your financial future.