Tax Planning
Tax Planning in Corona, CA. Tax liability refers to the amount you owe in taxes to local, state, and federal authorities. While it’s inevitable that a part of your earnings or profits goes to taxes, there are numerous legal strategies to lessen your tax burden. Tax planning is also vital to successful retirement planning. At Correct Capital, we don’t give tax advice; however, we partner with local Corona, CA individuals, families, and businesses to discover creative and proven ways to decrease their tax liability. One approach we may recommend is maximizing deductible employee or employer retirement contributions to reduce tax expenses. Reach out to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, connect with us online, or keep reading to learn how proactive tax planning can benefit you.
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Tax Planning for Corona, CA Individuals and Families
Proactive tax planning can help individuals and families increase their retirement savings and offer them more money for both the present and the future. Consider these elements when tax planning in Corona, CA:
- Standard Deduction vs. Itemizing —
The standard deduction is a automatic amount that allows a straightforward deduction from your taxable income. In 2024, the standard deductions are:
- $14,600 for single filers
- $29,200 for married, filing jointly
- $14,660 for married, filing separately
- $21,900 for head of household
If your deductible expenses exceed these amounts, you may benefit from itemizing your deductions, where you list each eligible deduction separately. The trade-off is that itemizing takes more time, as you need to provide evidence for each deduction. A financial planner in Corona, CA can work with you to decide whether claiming the standard or itemized deduction is more advantageous.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both provide tax advantages, though in different ways. Contributions to a traditional IRA may be fully or partially deductible, and taxes are only applied upon withdrawal. Roth IRA contributions, in contrast, are not deductible but allow for tax-free growth on your investments. The ideal choice depends on your personal financial and tax situation. One potential strategy is a Roth conversion, which moves funds from a traditional to a Roth IRA, letting you pay taxes now and enjoy tax-free growth later.
If you have a 401(k) plan with your employer, you can set aside income from your paycheck, placing it straight into your 401(k). The 401(k) contribution limit for 2024 is $23,000, along with an additional $7,500 for individuals 50 or older.
Freelancers or self-employed individuals can open up personal retirement plans tailored to their needs. Options include a Simplified Employee Pension (SEP) IRA or a One-Participant 401(k) Plan, enabling you to deduct your contributions.
- Tax-Loss Harvesting —
If you sell securities at a loss, you can offset the amount of capital gains tax owed on profits from other securities. This approach is particularly beneficial for short-term capital gains, which are often taxed at higher rates than long-term gains. Each year, up to $3,000 in capital losses can be deducted, and extra losses can be carried forward to future years.
- Consider Paying Next Year's Bills Now —
Medical expenses not reimbursed by insurance can be deducted if they exceed 7.5% of your AGI. Other potential deductions include prepaying property taxes if permitted, covering future tuition costs, or investing in career-advancing courses to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
Approximately 95% of married couples choose to file jointly, which is the only way to qualify for certain tax credits and deductions. For high-income spouses, filing separately may reduce their tax bracket, depending on income differences. If one spouse incurs significant medical expenses, it might be advantageous to file separately to meet the 7.5% threshold for medical deductions.
- Make Charitable Donations —
Donating to eligible organizations allows you to deduct as much as 60% of your adjusted gross income. Per IRS Publication 526, eligible organizations may include the following:
- Religious, scientific, educational, or anti-cruelty non-profit organizations for animals and children
- Veterans' organizations
- Domestic fraternal organizations operating under a "lodge system" if funds go to charity
- Organizations managing cemeteries
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as funds are for public use
- In some cases, Canadian, Mexican, or Israeli organizations if they qualify as U.S.-equivalent charities
*According to IRS Publication 526 (2023), Charitable Contributions
Opening a Donor-Advised Fund allows for an upfront tax deduction with the flexibility to recommend how funds are distributed over time.
If you are over 70½, you can make a qualified charitable distribution by transferring up to $105,000 annually from a traditional IRA directly to a charity, tax-free. Once you’re 73 or above, the donation can also be applied as your required minimum distribution, potentially lowering both future distribution requirements and tax obligations.
Using a skilled financial adviser for tax planning in Corona, CA not only helps lower your tax bill this year but also lays out a strategy for retirement taxes. At Correct Capital, we aim to put more money in your pocket now while preparing you for a secure financial future.
Common Tax Planning Mistakes for Corona, CA Individuals and Families
Effective tax planning is crucial for your family’s financial health. Unfortunately, errors in tax planning often cause people to owe more or miss savings opportunities. Here’s a look at some typical tax planning missteps and how Correct Capital helps you avoid them:
- Not Maximizing Retirement Contributions —
Failing to contribute the maximum allowable amounts to tax-advantaged retirement accounts, such as Traditional IRAs, Roth IRAs, or 401(k) plans, can lead to missed tax deductions and reduced growth potential over time.
How Correct Capital Helps: Our team assesses your finances to confirm you’re maximizing contributions, minimizing your tax burden while enhancing your retirement savings.
- Overlooking Available Tax Credits and Deductions —
Many people miss out on important tax credits and deductions, such as the Earned Income Tax Credit, Child Tax Credit, or deductions for education and medical expenses.
How Correct Capital Helps: Our advisors may review your tax return to see if you’ve claimed all available credits and deductions, aiming to maximize your refund (if eligible) or minimize any amount owed.
- Poor Record-Keeping —
When financial records are disorganized, it’s easier to overlook deductions and face issues at tax time. Proper documentation is critical for substantiating claims, especially during audits.
How Correct Capital Helps: Our team helps you establish organized record-keeping systems and locate required documents, making sure everything is available for tax filing or in case of an audit.
- Ignoring Tax-Efficient Investment Strategies —
Neglecting tax-efficient investment strategies, such as asset location or tax-loss harvesting, can erode overall returns.
How Correct Capital Helps: We offer guidance on tax-efficient investing, helping you select suitable investment vehicles and strategies to reduce taxes on dividends, interest, and capital gains.
- Failing to Plan for Life Changes —
Significant life changes, such as marriage, divorce, becoming a parent, or purchasing a home, can greatly affect your tax obligations. Overlooking these changes could result in unforeseen tax bills.
How Correct Capital Helps: We collaborate with you to update your tax planning strategies in response to life changes, ensuring you benefit from new deductions or credits and stay compliant with tax regulations.
- Underestimating Estimated Tax Payments —
If you earn income not subject to withholding, such as freelance or investment income, estimated tax payments may be necessary. Without making these payments, you could face fines and interest charges.
How Correct Capital Helps: We work with you to build cash reserves to cover estimated tax payments, helping you avoid penalties and interest fees.
- Not Utilizing Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) —
Contributing to HSAs and FSAs offers tax savings for medical expenses, yet many people overlook these options.
How Correct Capital Helps: We help you explore the advantages of HSAs and FSAs, advising on how pre-tax contributions for healthcare can lower your taxable income.
- Overlooking Education Savings Plans —
Ignoring options like 529 college savings plans can lead to missed tax benefits when saving for a child’s education.
How Correct Capital Helps: We help you open education savings accounts, allowing for tax-deferred growth and possible state tax benefits.
- Not Reviewing Withholding Allowances —
Withholding too much or too little tax from your paycheck often leads to surprises at tax time, like large refunds or owing taxes.
How Correct Capital Helps: We work with you to adjust your withholding allowances for improved cash flow and reduced surprises during tax season.
- Missing Opportunities for Charitable Contributions —
Failing to document or strategize charitable donations can mean lost deductions.
How Correct Capital Helps: We assist with planning your charitable giving to maximize tax benefits, including helping with Qualified Charitable Distributions (QCDs) if you qualify.
Tax Planning for Corona, CA Business Owners
Business owners in Corona, CA can utilize tax planning strategies to maximize retained earnings in their business. Keep the following in mind for effective tax planning for your Corona, CA business:
- Review the Structure of Your Business —
The structure of your business impacts tax planning and should be carefully considered. Forming your business as an LLC, sole proprietorship, partnership, or S or C corporation will influence both the corporate and personal tax rates.
- Review the Retirement Plans You Offer Employees —
Setting up retirement plans like 401(k)s, 403(b)s, and similar options can help reduce tax obligations. The "SECURE" Act of 2019 changed retirement plan rules for both small and large employers, so it’s wise to consult a financial advisor in Corona, CA about how these changes impact tax planning.
For high-income business owners with well-paid employees, consider a Cash Balance Pension Plan. While this may involve substantial contributions, the tax savings can be considerable.
- Have Your Family Work For The Business —
Employing family members can yield tax advantages. Children can earn up to $14,600 without paying taxes and could start saving in a ROTH IRA. Having your spouse on the payroll can let you double the amount you contribute to retirement.
- Use a Company Vehicle —
Depending on your business activities in Corona, CA, both you and your employees could use a company vehicle and deduct the associated costs. This deduction can be made in two ways:
- Use the standard mileage rate to deduct 67 cents per mile (applicable for both gas and electric vehicles); or
- Track your actual expenses, such as maintenance, registration fees, and fuel, to determine if this amount exceeds the standard mileage rate deduction.
- Consider Fringe Benefits For Your Employees —
Raising employee salaries may lead to increased employment tax costs. Consider whether employees would prefer fringe benefits instead of direct wage increases. Possible fringe benefits that may reduce tax liabilities are health insurance, group life insurance, childcare assistance, transport reimbursements, meals, family or medical leave, and continuing education reimbursement.
You can implement accountable plans to cover certain employee expenses, such as travel, meals, or entertainment, without reporting them as income.
- Look into Carryover Deductions —
When some deductions are unavailable this year, they may be eligible for carryover into future years. Examples of carryover deductions include home office expenses, net operating losses, business credits, and capital losses.
Tax regulations for businesses are always in flux. Working with a Corona, CA tax planner offers the benefit of joint efforts with your tax professional to explore methods for boosting your financial future.
Common Tax Planning Mistakes for Corona, CA Businesses
Efficient tax planning can help businesses reduce tax burdens and boost profitability. Yet, numerous businesses make frequent tax errors that result in increased tax bills, overlooked deductions, and potential penalties. Below are some of the most common tax planning errors businesses make and how Correct Capital can help you avoid them.
- Not Paying Estimated Quarterly Taxes —
Failing to pay or underpaying quarterly estimated taxes can result in IRS penalties and interest charges. Small businesses, freelancers, and companies with fluctuating income are particularly susceptible to this.
How Correct Capital Helps: We help businesses accurately calculate and schedule estimated tax payments, ensuring compliance with IRS deadlines and preventing unnecessary penalties.
- Neglecting Retirement Plan Contributions for Owners and Employees —
Many companies miss the opportunity to use retirement contributions to lower their taxable income. Options such as 401(k)s, SEP IRAs, and Solo 401(k)s deliver notable tax benefits for both owners and staff.
How Correct Capital Helps: We work with businesses to set up and maximize retirement plans, which reduce taxes while also helping attract and retain talent.
- Not Planning for Profitability and Cash Flow —
Focusing solely on cutting current taxes often leads businesses to miss out on planning for sustained growth and profitability. This short-term focus can result in missed chances for strategic investments or tax-efficient growth strategies.
How Correct Capital Helps: Our team provides tax planning that goes beyond short-term cuts, supporting businesses in planning for growth, reinvesting, and handling cash flow efficiently.
- Neglecting Exit and Estate Planning —
Business owners often fail to create a succession plan to address the financial aspects of selling their business. Owners frequently concentrate on operations and may neglect how to allocate proceeds from a sale in a tax-effective manner. Additionally, without estate planning, owners may miss opportunities to ensure beneficiaries and loved ones are taken care of.
How Correct Capital Helps: Our team supports business owners in exit planning, helping them decide how to manage the proceeds from a sale. Our approach involves identifying the purpose of the funds and applying estate planning strategies, which consider beneficiaries and minimize taxes.
Tax Planning in Corona, CA | Correct Capital Wealth Management
At Correct Capital, our Corona, CA financial advisors and tax planners understand how essential the financial health of your family or business is, both now and in the future. For this reason, we follow the fiduciary standard and our I.O.U. promise, meaning that every recommendation we provide is independent, objective, and unbiased. Since tax laws are always changing, it’s vital to surround yourself with a solid team, such as your Corona, CA financial advisor, tax professional, and legal advisor. For support with tax planning, retirement planning, or any other financial concerns in Corona, CA, contact Correct Capital at 877-930-4015 or reach out online.
