Tax Planning
Tax Planning in Des Peres, MO. Tax liability is how much you owe in taxes to local, state, and federal authorities. Even though Uncle Sam will always get some percentage of your earnings or profits, The IRS allows for several ways you can reduce how much you owe. Tax planning is also key for successful retirement planning. At Correct Capital, we work with local Des Peres, MO individuals, families, and businesses to find creative and proven strategies for reducing how much they owe. Speak to Correct Capital's financial planners and fiduciary advisors today at 877-930-4015, reach out online, or read on to see how prudent tax planning can keep more money in your account both now and in the future.
Tax Planning for Des Peres, MO Individuals and Families
Diligent tax planning can help individuals and families increase their retirement savings and afford them more money for both now and the near future. Ways to reduce your tax liability when tax planning in Des Peres, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar amount that reduces the amount of income you are taxed on. In 2022 and 2023, that flat-rate is:
2022
- $12,950 for single filers
- $25,900 for married, filing jointly
- $12,950 for married, filing separately
- $19,400 for head of household
2023
- $13,850 for single filers
- $27, 700 for married, filing jointly
- $13,850 for married, filing separately
- $20,800 for head of household
If more income that shouldn't be taxed than the above, you can itemize your return. The downside is that filing will be more complicated, and you have to prove each deduction.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Money you put into a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Money put into a Roth IRA are not deductible, but the money grows tax free. Your unique situation will determine what may be better for you in terms of tax planning. For instance, if you expect your taxes to go up down the road, you can convert funds from a traditional IRA to a Roth IRA to pay taxes on the transfer, and enjoy tax-free withdrawals when you need the money in retirement.
If you contribute to a 401(k) plan with your employer, you can choose to have earnings deposited into your 401(k) account instead of it going to your paycheck. You can contribute up to $20,500 to a 401(k) in 2022, or up to $27,000 if you're at least 50 years old. For 2023, you can deposit up to $22,500 with an extra $7,500.
If you're have freelance income, you can open up an individual retirement plan, like a One-Participant 401(k) Plan, and you can deduct the money you put there from your taxable income.
- Tax-Loss Harvesting —
If you sell stocks, bonds, or options at a loss, you can use that loss to reduce your taxable capital gains. This strategy is more common with short-term capital gains, as the tax rate is usually higher than long-term. You can deduct up to $3,000 in capital gains losses per year, but you may be able to deduct higher losses in the future.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can deduct those that are higher than 7.5% of your adjusted gross income. You can also make deductions this year for property taxes if you pay early (and if your municipality allows it), pay for a kid's tuition or for career-boosting classes for you early for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS reports that roughly 95% of married couples choose to file joint tax returns. It helps couples qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. But, if both spouses are higher-earning individuals, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, it may make sense to file separately to qualify for the 7.5% threshold for medical deductions.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income via charitable donations. Accepted organizations include:
- Non-profit organizations that are religious, scientific, educational, or dedicated to the prevention of cruelty to animals and children
- Veterans' organizations
- A domestic fraternal organization operating under the "lodge system," as long as the donations are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the donations are meant to benefit the public
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization would have been organized as a charity under U.S. law
If you save money in a Donor-Advised Fund, you can deduct a bulk amount now, while still being able to wait to decide how the funds will get distributed in the future.
If you are at least 70½ years old, you can make what's referred to as a qualified charitable distribution by transferring a maximum of $100,000 a year from a traditional IRA directly to a charity tax-free. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in Des Peres, MO|With the help a financial adviser in Des Peres, MO, you can not only reduce your tax liability this year, but plan out your taxes into retirement.
Tax Planning for Des Peres, MO Business Owners
Business owners can use effective tax planning to keep more money in their business. Ways to reduce your tax liability when tax planning for your Des Peres, MO business include:
- Assess How Your Business Is Structured —
A lot goes into the structure of a business, and tax planning should be considered. Structuring your business as an LLC, sole proprietorship, partnership, or S or C corporation will have consequences for how much you pay in taxes both as a business and individually.
- Review the Retirement Plans You Offer Employees —
Offering your employees retirement plans, such as 401(k)s, 403(b)s, and other defined contribution plans is a great way to reduce your tax liability. The "SECURE" Act of 2019 offers new benefits for employers who offer certain retirement plans, so it's likely in your best interest to meet with a financial advisor in Des Peres, MO about how they may apply to your business.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While you would need to significant sums of money per year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Just offering raises can result in higher taxes for you. See if your employees would be willing to accept fringe benefits rather than just giving them a higher paycheck. Examples that could help reduce your tax liability are medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or continuing education reimbursement.
You can also use accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without counting the reimbursement as income.
- Have Your Family Work For The Business —
Children can work for you tax-free on income up to $12,000, and you can help them begin to save in a vehicle like a ROTH IRA. You can double your retirement plan contributions by having your spouse work for the business.
- Have a Company Vehicle —
If you and your employees need to drive as part of the normal course of your business, you can deduct the transportation costs. There are two different ways of deducting those costs:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for January to June in 2022) or 62.5 cents per mile (for July to December in 2022); or
- Document your actual expenses, like maintenance, registration fees, and gas, and calculate if your deduction would be more than the standard mileage rate
- Look into Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over into subsequent years. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
US lawmakers are always making new tax laws for businesses, or changing old ones. A key benefit of consulting with an experienced Des Peres, MO tax planner is that they will work with you and your tax professional to determine if there are ways to strengthen your long-term financial success.
Other services we offer in Des Peres, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
- 401(k) For Small Business
- Small Business Retirement Plans
Tax Planning in Des Peres, MO | Correct Capital Wealth Management
At Correct Capital, our Des Peres, MO financial advisors know strong financial health is key to your overall success. That's why we give our I.O.U. promise; all the advice we give you will be independent, objective, and unbiased. With tax law always changing, you need a team around you that will help, like your Des Peres, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Des Peres, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
