Solo Attorneys: Year-End Tax Moves to Boost Savings

As a solo attorney, you wear many hats. You’re managing clients, handling cases, and running your practice—all on your own. With the end of the year fast approaching, there’s one more crucial role you need to play: tax strategist.

For solo practitioners, the stakes are high. Every dollar saved in taxes is money that can be reinvested into your practice, used to expand your client base, or simply kept for your personal financial goals. So, how can you maximize your savings and reduce your tax burden before December 31?

Let’s dive into key tax-saving strategies tailored specifically for solo attorneys like you.

1. SEP IRA vs. Solo 401(k): Which Is Better for Your Income?

As a solo attorney, setting aside funds for your retirement not only helps secure your future but also provides an immediate tax benefit. Two of the most powerful retirement plans available to you are the SEP IRA and Solo 401(k).

But which one is better for your income level?

• SEP IRA: If you have fluctuating income or if you anticipate a high-earning year, a SEP IRA may be the best option. You can contribute up to 25% of your net earnings, with a maximum contribution of $69,000 for 2024. The higher your earnings, the more you can set aside.
• Solo 401(k): If your income is more moderate, the Solo 401(k) might be the smarter choice. You can contribute both as an employer and an employee, allowing you to reach the $69,000 contribution limit more easily. Additionally, if you’re over 50, you can add a $7,000 catch-up contribution, giving you a bit more flexibility.

Pro Tip: Maximize your contributions to reduce your taxable income. By contributing to these retirement accounts before the year ends, you can significantly lower your tax bill.

2. Defer Income to Lower Your Taxable Income Now

If you’ve had a high-earning year, deferring income into the next tax year is an effective strategy to lower your taxable income now.

Here’s how it works:

• Postpone invoicing clients until January to defer income into the next tax year.
• Delay bonuses or extra payments you may owe yourself until after December 31.

By pushing income into 2025, you reduce your current year’s taxable income, lowering your tax liability. This is especially beneficial if you anticipate being in a lower tax bracket next year.

3. Accelerate Business Expenses to Claim Deductions in 2024

On the flip side of deferring income, you can also accelerate expenses to claim more deductions in the current tax year.

Here’s how you can do it:

• Prepay bills like office rent, utilities, or insurance premiums before December 31.
• Purchase any necessary office equipment or technology, such as a new laptop, software subscriptions, or office furniture.
• Consider paying professional fees, such as bar association dues or continuing legal education (CLE) courses, before the end of the year.

Accelerating these business expenses allows you to reduce your taxable income now rather than next year, giving you immediate savings.

4. Explore Available Tax Credits

Tax credits are powerful because they directly reduce your tax bill, not just your taxable income. As a solo attorney, you may qualify for several credits that can lower what you owe.

Here are some valuable credits to explore:

• Home Office Deduction: If you use part of your home exclusively for your practice, you can deduct expenses like mortgage interest, utilities, and home repairs.
• Self-Employed Health Insurance Deduction: If you pay for your own health insurance, you can deduct premiums for yourself and your family, reducing your taxable income.

Both of these credits are designed to benefit solo practitioners, and claiming them can make a significant impact on your overall tax liability.

5. Review Your Estimated Tax Payments

Solo attorneys are responsible for making quarterly estimated tax payments to cover income, self-employment, and other taxes. With the year coming to a close, it’s essential to review your payments and make any necessary adjustments.

If your income has changed dramatically in the last quarter, you may need to increase your estimated tax payments to avoid underpayment penalties. Conversely, if you’ve overpaid, you can lower your final quarterly payment or apply the excess to next year’s taxes.

Staying on top of these payments ensures that you’re not hit with any surprises when tax season arrives.

Why Year-End Tax Moves Matter for Solo Attorneys

Tax planning isn’t something you can afford to leave until the last minute—especially as a solo attorney managing your own practice. By implementing these strategies now, you can significantly lower your tax bill, keep more of your earnings, and set yourself up for financial success in 2025.

The key is to be proactive. Don’t wait until it’s too late to take advantage of the tax-saving opportunities available to you. By carefully managing your income, expenses, and credits, you can maximize your deductions and minimize what you owe.

Solo But Powerful—Let Us Optimize Your Tax Strategy

At Prestige Accounting and Consulting, we understand the unique challenges solo attorneys face when it comes to tax planning. My team of CPAs is here to help you navigate these complexities and ensure you’re making the most of every tax-saving opportunity.

Contact me today to schedule a consultation and get a personalized tax strategy designed to maximize your savings before the year ends.