Just last week, I was speaking with a law firm owner who was convinced she'd missed all opportunities for tax planning because it was "already 2025." She was surprised – and relieved – when I showed her several powerful tax-saving strategies still available for the 2024 tax year.
This conversation reminded me that many successful law firm owners might be leaving money on the table simply because they don't realize the options still open to them.
Think about it: You meticulously prepare for court cases months in advance, yet tax planning often gets pushed to the last minute. Between client meetings, court appearances, and managing your firm, it's completely understandable.
But here's the good news – you haven't missed your chance to make strategic tax moves for 2024.
Let me share what I told that attorney last week. While reviewing her situation, we discovered she could still contribute to her retirement accounts until April 15th, potentially reducing her 2024 tax liability by thousands of dollars. This isn't unusual – I've seen many law firm owners face similar situations where they're paying more in taxes than necessary simply because they weren't aware of their options.
Here's what many don't realize: Tax planning isn't just about your income – it's about strategically using available tools to manage your tax exposure. As a law firm owner, you have several powerful options still at your disposal:
Traditional and Roth IRA Contributions:
You have until April 15th to make contributions for 2024. Technically, the deadline is the tax filling deadline, which means with extensions these contributions could occur as late as October 15th.
While income limits may affect direct Roth IRA contributions, there's a roth conversion strategy nicknamed the "Backdoor Roth" that might be perfect for high-earning attorneys.
Health Savings Accounts (HSAs):
If you have a qualifying high-deductible health plan, you can still contribute to an HSA for 2024. This offers triple tax advantages – tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses.
Solo 401(k) and SEP IRA Contributions:
As a firm owner, you can still establish and fund these small business retirement plans for 2024 (Thank you Secure Act 2.0). These can be particularly powerful tools for managing your Qualified Business Income (QBI) deduction.
Speaking of QBI..
This deduction can be a game-changer for law firm owners, but it requires strategic planning. The decisions you make about retirement contributions and business expenses can significantly impact your QBI deduction.
It's like a chess game where each move affects multiple pieces on the board.
I recently explored this with another law firm owner who was frustrated because his income was too high for certain tax benefits. By strategically timing his retirement contributions and structuring his compensation properly, we were able to optimize his tax situation while building his long-term wealth.
Remember, you don't need to implement every strategy – that's rarely the right approach. The key is identifying which combination of tools works best for your specific situation.
Just as you wouldn't use the same legal strategy for every case, your tax planning should be tailored to your unique circumstances.
What's most important is taking action before April 15th. These opportunities have a strict deadline, and once it passes, these tax-saving strategies will no longer be available for 2024.
In my next email, I'll explore the often-misunderstood world of Health Savings Accounts – a strategy that many of my law firm clients initially overlook but quickly come to appreciate. I've seen these accounts make a remarkable difference in both current tax savings and long-term wealth building for firm owners who understand how to use them strategically.
Until then, take a moment to consider your tax situation. Are you confident you're using all the tools available to you? If you're not sure, that's perfectly normal – tax planning for law firm owners can be complex, but the potential benefits make it worth exploring.
