Tax Planning
Tax Planning in Cottleville, MO. Tax liability is how much taxes you will need to pay to local, state, and federal governments. While Uncle Sam will always collect some portion of your earnings or profits, there are perfectly legal ways you can reduce how much you owe. Tax planning is also key to planning the retirement of your dreams. At Correct Capital, we work with Cottleville, MO individuals, families, and businesses in the Cottleville, MO area to find creative and proven strategies for reducing how much they owe. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out online, or read the article below to learn how diligent tax planning can benefit you.
Tax Planning for Cottleville, MO Individuals and Families
Smart tax planning is essential for individuals and families who want to increase their retirement savings and afford them more money for both now and the near future. Ways to reduce how much you owe when tax planning in Cottleville, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar amount that you can deduct from your taxable income. In 2022 and 2023, the standard deductions are:
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 your deductible income is more than the above, you can count up each deduction you're eligible for individually. The disadvantage 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. Contributions to a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Savings put into a Roth IRA do not affect your taxable income, but the money grows tax free. Your unique situation will determine which type of account is preferable for your tax planning. For example, if you expect your taxes to go up down the road, you can convert money from a traditional IRA to a Roth IRA to pay taxes on the conversation, while allowing the money to grow tax-free.
If you have a 401(k) plan with your employer, you can choose to have money deposited into your 401(k) account instead of it going to your paycheck. You can place up to $20,500 to a 401(k) in 2022, plus an extra $6,500 if you're at least 50 years old. For 2023, you can contribute up to $22,500 or $30,000.
If you're self-employed, you can open up an individual retirement plan, such as a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, you can offset the amount of capital gains tax you would be liable for if other securities sold at a profit. Tax-loss harvesting is more common with short-term capital gains, as the tax rate is often higher than long-term. The maximum deductible amount is $3,000 per year, but you may be able to deduct higher losses down the road.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, you can write off those that are greater than 7.5% of your adjusted gross income. Paying property taxes early can also help you reduce your taxable income, and you can pay tuition to an undergraduate, graduate and professional degree courses for your or a child, as well as courses that improve your job skills 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 have considerable earnings, they may be in a lower tax bracket if they file separately. If one spouse received considerable medical care in a given year, 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. Qualifying charities are:
- 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," under the condition that the money are used for charity
- Cemetery companies
- Any government entities, under the condition that the donations are for public use
- In many cases, 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 start a Donor-Advised Fund, you can contribute a large amount now for an immediate tax reduction, and recommend how the funds are distributed over the years that follow.
If you are at least 70½ years of age, 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 use a knowledgeable financial planner for your tax planning in Cottleville, MO|With the help a financial planner in Cottleville, MO, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for Cottleville, MO Business Owners
Business owners can use smart tax planning to retain more money in their business. Ways to owe less in taxes when tax planning for your Cottleville, MO business include:
- Review 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 both your corporate and your individual tax rate.
- Evaluate 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 speak to a financial advisor in Cottleville, MO about how those changes affect your tax planning.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While you would need to contribute several hundred thousand dollars per year, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Just offering more money can lead to higher taxes for you. See if your employees would be open to fringe benefits as part of their compensation, instead of just giving them more money. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also use accountable plans to reimburse employees for business expenses without having to report them as employee 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 kick-start their retirement savings through an account like a ROTH IRA. You can double your retirement plan contributions by having your spouse work for the business.
- Use 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. You can make the deduction in two ways:
- Use the standard mileage rate to deduct 58.5 cents per mile (for January to June in 2022) or 62.5 cents per mile (for the last six months of 2022); or
- Keep a record of 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 —
You're allowed to carryover some deductions into subsequent years. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always changing. A key benefit of consulting with a professional Cottleville, MO tax planner is that they will work with you and the person who prepares your taxes to determine if there are ways to improve your personal and business financial success.
Other services we offer in Cottleville, 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 Cottleville, MO | Correct Capital Wealth Management
At Correct Capital, our Cottleville, MO tax planners know strong financial health is key to your overall success. That is why we hold ourselves to the fiduciary standard: we are legally and ethically bound to act in your best interest. With tax law always changing, it's important to put a team around you that will help, like your Cottleville, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial needs in Cottleville, MO, call Correct Capital today at 877-930-4015 or contact us online.
