Introduction
As the summer heat sets in, many attorneys are turning their attention away from the courtroom and toward their personal finances. With tax season firmly in the rearview mirror, it can be tempting for lawyers to let their guard down when it comes to managing their taxes. However, being proactive about tax planning throughout the year is essential for maximizing deductions and minimizing your tax burden.
In this blog post, we’ll explore five timely tax tips that attorneys can implement right now to get the most out of their 2024 tax return. Whether you’re a solo practitioner or part of a large firm, these strategies can help you save money and keep more of what you earn.
Tip 1: Take Advantage of Tax-Deductible Home Office Expenses
One of the most valuable tax deductions available to attorneys is the home office deduction. If you use a portion of your home regularly and exclusively for business purposes, you may be able to deduct a percentage of your rent, utilities, insurance, and other related expenses.
This deduction can be particularly beneficial for attorneys who have shifted to a hybrid or fully remote work model during the pandemic. Even if you only use your home office a few days per week, you may still qualify for the deduction. Just be sure to keep detailed records of your business use of the space.
Tip 2: Maximize Deductions for Continuing Legal Education (CLE) Expenses
Staying up-to-date on the latest legal developments is a must for attorneys, and the costs associated with continuing legal education (CLE) courses can really add up. Fortunately, these expenses are generally tax-deductible as long as they are ordinary and necessary for your law practice.
In addition to registration fees for CLE classes, you can also deduct travel expenses such as airfare, hotel stays, and meals while attending these events. Just be sure to keep careful track of your receipts and document how the expenses are related to your work as an attorney.
Tip 3: Deduct Business-Related Vehicle Expenses
If you use your personal vehicle for business purposes, such as driving to court appearances, client meetings, or legal conferences, you may be able to deduct a portion of your vehicle expenses on your tax return. This can include costs like gas, insurance, repairs, and maintenance.
There are two main methods for calculating your vehicle deduction: the standard mileage rate or the actual expenses method. The standard mileage rate is often the simpler option, but the actual expenses method may result in a larger deduction if you have a high-mileage vehicle or significant repair costs. Work with your accountant to determine which approach makes the most sense for your situation.
Tip 4: Contribute to a Retirement Account
As an attorney, you have access to a variety of tax-advantaged retirement accounts that can help you save for the future while also reducing your current-year tax bill. Contributing to a 401(k), IRA, or other qualified retirement plan allows you to defer paying taxes on those funds until retirement, when your tax rate may be lower.
Even if you can only afford to contribute a small amount each month, those contributions can add up quickly thanks to the power of compound interest. Plus, many employers offer matching contributions, which is essentially free money that can supercharge your savings.
Tip 5: Explore Tax-Saving Strategies for Your Law Firm
If you own your own law practice, there are a number of tax-saving strategies you can implement at the business level. This might include:
- Forming your practice as a pass-through entity (such as an S corporation or LLC) to avoid double taxation
- Deducting business expenses like office rent, equipment, and professional development
- Claiming the qualified business income (QBI) deduction, which allows you to deduct up to 20% of your net business income
- Investing in tax-advantaged retirement plans for your firm, such as a SEP IRA or solo 401(k)
Working closely with a knowledgeable accountant can help you identify and take advantage of all the tax-saving opportunities available to your law firm.
Conclusion
By implementing these five midsummer tax tips, attorneys can position themselves to maximize their deductions and minimize their tax liability when it’s time to file their 2024 returns. Remember, being proactive about tax planning throughout the year is key to keeping more of what you earn.
If you have any questions or need assistance with your law firm’s bookkeeping or tax preparation, don’t hesitate to reach out to us. We’re here to help you navigate the complex world of taxes and ensure your practice is operating as efficiently and profitably as possible.