As a small law firm owner, your time is constantly stretched between serving your clients, growing your practice, and focusing on your personal needs. However, with the April 15, 2025, tax filing deadline approaching, there’s still time to implement powerful wealth building strategies for the 2024 tax year that could significantly pay dividends for years to come.

I’m not talking about the hottest stock or crypto coin. This is all about addition by subtraction – lowering those fat payments you’re making to Uncle Sam.

But before we dive in, let’s get the disclaimer out of the way: As with any important financial and tax decisions you are making, please consult your tax and financial professionals for specific advice as it relates to your situation. This article is meant for educational purposes only.

The Problem

Many small law firm owners miss valuable tax-advantaged opportunities simply because they aren’t aware these options exist or don’t realize they can still make prior-year contributions. This oversight can result in paying more taxes than necessary and missing out on valuable retirement savings opportunities.

Impact on Your Practice

The consequences of overlooking these strategies extend beyond just paying higher taxes. For law firm owners, your status as a Specified Service Trade or Business (SSTB) under tax law creates unique challenges for tax planning.

However, this also means that maximizing available tax advantages becomes even more crucial for your overall financial health.

For example, implementing one or two isolated strategies may lower income in a broader sense so that qualifying for additional income driven deductions may become a reality as well (The Qualified Business Income or “QBI” deduction comes to mind here – more on this below).

Key Opportunities and Context

Several tax-advantaged strategies remain available for the 2024 tax year. Here are the key areas where I see clients make the most impact:

Retirement Account Options: You still have time to make contributions to various retirement accounts for 2024. This includes traditional and Roth IRAs, SEP IRAs for self-employed individuals, and employer contributions to Individual 401(k) plans. Even if your income is too high for direct Roth IRA contributions, there are some roth conversion strategies that may be available to help you take advantage of tax-free growth potential.

Individual 401(k) Flexibility: Thanks to SECURE Act 2.0, Individual 401(k)s can now be established and funded as late as your tax filing deadline for the initial year. This gives you additional flexibility in managing both your retirement savings and tax situation.

Health Savings Account Benefits: If you participated in a qualified high-deductible health plan last year, you can still make HSA contributions for 2024. These accounts offer unique advantages: tax deductions for contributions, tax-free growth, and tax-free withdrawals when used for qualified medical expenses.

Qualified Business Income Considerations for Business Owners: While law firms face SSTB limitations on the QBI deduction, strategic planning around your taxable income thresholds can help maximize the opportunity to take advantage of this deduction. In other words, thoughtful tax planning can create a positive snowball effect – reducing your taxable income often unlocks additional tax-saving opportunities.

For 2024, the phase-out range for the QBI deduction begins at taxable income of $383,900 for joint filers and $191,950 for single filers.

Practical Solutions and Implementation

To maximize these opportunities before the tax deadline:

1. Review your 2024 income and tax projections to identify which strategies offer the most benefit
2. Calculate available contribution space across different account types
3. Consider the interaction between different tax benefits and your SSTB status
4. Prioritize contributions based on your cash flow and tax reduction goals
5. Ensure proper documentation for all contributions and their designation as 2024 contributions

The complexity of these various tax strategies, combined with the unique challenges faced by lawyers and law firm owners, highlights the value of integrated financial and tax planning.

Working with a financial planning firm that understands both the investment and tax implications of these strategies can help ensure you’re maximizing available opportunities while staying compliant with relevant regulations.

Many lawyers find that incorporating tax-focused planning into their broader investment strategy helps them build wealth more efficiently while managing their current tax liability. A comprehensive approach that considers both immediate tax savings and long-term investment growth often yields the best results.

Remember, while the 2024 tax year may be over, you still have time to make a significant impact on your tax situation and long-term financial health. The key is taking action before the April 15 deadline.

Disclosure: The information within this article is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision.

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David Hunter, CFP® is a CERTIFIED FINANCIAL PLANNER™ and owner of First Light Wealth, LLC, a financial planning & wealth management firm with a unique focus on serving attorneys nationwide. David has over a decade of experience helping clients build financial plans and has been featured in publications such as Attorney at Work, ThinkAdvisor, MarketWatch, Financial Planning, and InvestmentNews. David also writes weekly to attorneys in his popular Money Meets Law newsletter. For more about David, visit firstlightwealth.com/lawyers or connect with him on LinkedIn.