Tax Planning
Tax Planning in Joliet, IL. Tax liability refers to the amount you owe in taxes to local, state, and federal authorities. Although paying taxes is unavoidable, various lawful strategies can minimize how much you owe. Tax planning is also vital to successful retirement planning. At Correct Capital, we don’t offer tax advice, but we partner with local Joliet, IL residents, families, and business owners to discover creative and proven ways to reduce their tax obligations. For instance, we might advise an individual to maximize deductible contributions to their retirement plan, which can help lessen tax costs. Reach out to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read on to see how effective tax planning can make a difference.
Tax Planning for Joliet, IL Individuals and Families
Effective tax strategies can help individuals and families grow their retirement savings and provide them with more money for both the present and the future. Consider these elements when tax planning in Joliet, IL:
- Standard Deduction vs. Itemizing —
The standard deduction is a preset amount that you can deduct from your taxable income without additional documentation. 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
When your deductible income is more than the standard deduction, itemizing each eligible deduction may be advantageous. The trade-off is that itemizing takes more time, as you need to provide evidence for each deduction. A financial planner in Joliet, IL can work with you to decide whether claiming the standard or itemized deduction is more suitable.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both provide tax advantages, though in different ways. A traditional IRA allows for contributions that may be deductible, with taxes deferred until you withdraw funds. Roth IRA contributions, in contrast, are not deductible but allow for tax-free growth on your investments. Which account benefits you most will depend on your specific tax planning needs. For example, if you anticipate higher taxes in the future, you might consider transferring money from a traditional IRA to a Roth IRA—a process known as a Roth conversion—paying taxes now but securing future tax-free growth.
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). In 2024, the maximum contribution limit for a 401(k) is $23,000, with an additional $7,500 allowed if you’re 50 or older.
For self-employed individuals or those with freelance income, individual retirement plans are also available. Options include a Simplified Employee Pension (SEP) IRA or a One-Participant 401(k) Plan, which allow you to deduct your contributions.
- Tax-Loss Harvesting —
By selling securities at a loss, you can offset capital gains taxes owed on gains from other investments. This approach is particularly beneficial for short-term capital gains, which are often taxed at higher rates than long-term gains. You can deduct up to $3,000 in capital losses each year, with any remaining losses rolled over into future tax 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 —
Roughly 95% of married individuals file jointly, as this is required for some tax benefits and credits. However, if one spouse is a higher earner, filing separately might place them in a lower tax bracket. Separate filing may also make sense if one partner has considerable medical costs, making it easier to meet the 7.5% medical deduction limit.
- Make Charitable Donations —
By donating to qualifying organizations, you may deduct up to 60% of your adjusted gross income. According to IRS Publication 526, qualifying organizations include:
- Religious, scientific, educational, or anti-cruelty non-profit organizations for animals and children
- Non-profits supporting veterans
- Fraternal organizations under a "lodge system" provided funds are used for charity
- Organizations managing cemeteries
- Government agencies at any level within the U.S. when funds are for public benefit
- Canadian, Mexican, or Israeli organizations, provided they meet U.S. charity qualifications
*According to IRS Publication 526 (2023), Charitable Contributions
By opening a Donor-Advised Fund, you can make a large contribution now for an immediate tax deduction and recommend how the funds are allocated in the future.
At age 70½ or older, you can make a qualified charitable distribution by transferring up to $105,000 each year tax-free from a traditional IRA directly to a charity. If you are 73 or older, that donation also counts toward your required minimum distribution, which may reduce both your future required distributions and tax burden.
Using a skilled financial adviser for tax planning in Joliet, IL 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 Joliet, IL Individuals and Families
Smart tax planning is vital for your family’s overall financial security. However, mistakes in tax planning can lead to paying more in taxes than necessary or missing out on potential savings. Here are a few frequent tax planning mistakes and ways Correct Capital can assist in preventing them:
- Not Maximizing Retirement Contributions —
By not maximizing contributions to retirement accounts like Traditional IRAs, Roth IRAs, or 401(k)s, you risk losing out on tax deductions and long-term growth opportunities.
How Correct Capital Helps: We evaluate your financial situation to ensure you’re contributing as much as feasible, which can reduce taxable income while building a strong retirement foundation.
- 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: We carefully examine your tax return to verify if you’ve taken advantage of all possible credits and deductions, helping to maximize refunds or reduce liabilities.
- 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: We assist you in setting up effective record-keeping systems and locating necessary documentation, ensuring all receipts and documents are properly organized and accessible when needed.
- Ignoring Tax-Efficient Investment Strategies —
Overlooking the tax impact of investment decisions can diminish your returns. This may include neglecting asset location strategies or failing to harvest tax losses.
How Correct Capital Helps: We help you implement tax-efficient investment strategies, including selecting the best vehicles and methods to lower taxes on dividends, interest, and gains.
- Failing to Plan for Life Changes —
Life events, including marriage, divorce, welcoming a child, or buying a property, often alter your tax landscape considerably. Neglecting to adjust for these changes can lead to unexpected tax liabilities.
How Correct Capital Helps: We help you adjust your tax strategy based on life changes, allowing you to take advantage of new tax breaks while remaining compliant with tax laws.
- Underestimating Estimated Tax Payments —
For income not subject to withholding—like freelance or investment earnings—you may be required to make estimated tax payments. Failure to do so can lead to penalties and interest.
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) —
HSAs and FSAs provide tax advantages for covering medical costs, but many eligible individuals miss out by not contributing.
How Correct Capital Helps: Our advisors explain the advantages of HSAs and FSAs and determine if they’re right for you, helping you set aside pre-tax funds for medical costs to reduce taxes.
- Overlooking Education Savings Plans —
Failing to consider 529 college savings plans may mean missing valuable tax benefits for education savings.
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 —
Incorrect tax withholding—either too much or too little—may result in a big refund or an unexpected tax bill.
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 —
Not properly documenting charitable donations can lead to missed tax 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 Joliet, IL Business Owners
Business owners in Joliet, IL can use strategic tax planning to keep more revenue within their business. Keep the following in mind for effective tax planning for your Joliet, IL business:
- Review the Structure of Your Business —
Your business structure plays a significant role in tax planning and should be carefully evaluated. Structuring your business as an LLC, sole proprietorship, partnership, or S or C corporation will affect both corporate and individual 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. With changes under the "SECURE" Act of 2019, speaking to a financial advisor in Joliet, IL about retirement plan tax benefits is recommended.
For business owners and employees with higher incomes, a Cash Balance Pension Plan can offer significant tax savings, even if it requires a sizable investment.
- 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 —
Based on your Joliet, IL business type, you and your employees may qualify to use a company vehicle with deductible transportation costs. You can take this deduction using one of two methods:
- Use the standard mileage rate to deduct 67 cents per mile (applicable for both gas and electric vehicles); or
- Maintain records of actual costs like maintenance, registration, and fuel to calculate whether this deduction is greater than the standard mileage rate.
- Consider Fringe Benefits For Your Employees —
Raising employee salaries may lead to increased employment tax costs. See if employees are open to receiving fringe benefits as part of their pay package rather than a higher paycheck. Some options that may help lower your tax costs include health insurance, group life insurance, childcare assistance, travel reimbursements, meal programs, paid family leave, and education reimbursements.
Accountable plans can also be used to reimburse employees for expenses like travel, meals, or entertainment without these amounts being reported as employee income.
- Look into Carryover Deductions —
When some deductions are unavailable this year, they may be eligible for carryover into future years. These may include deductions such as home office expenses, net operating losses, business credits, and capital losses.
Tax regulations for businesses are always in flux. Partnering with a professional tax planner in Joliet, IL means they work with you and your tax expert to identify strategies for enhancing long-term financial outcomes.
Common Tax Planning Mistakes for Joliet, IL Businesses
With smart tax planning, businesses can minimize liabilities and enhance profitability. However, many businesses fall into common tax mistakes that may lead to higher taxes, missed deductions, or even 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. This is especially common among small businesses, freelancers, or companies with variable income.
How Correct Capital Helps: Our team assists in calculating and timing estimated tax payments to keep businesses compliant with IRS rules and avoid 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 assist businesses in establishing retirement plans that cut taxes and appeal to prospective and current employees.
- 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. Such a narrow focus may cause missed opportunities for reinvestment or tax-efficient growth.
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 —
Many business owners don’t establish a succession plan to handle the financial details involved in selling their business. Owners frequently concentrate on operations and may neglect how to allocate proceeds from a sale in a tax-effective manner. Without proper estate planning, owners might not fully address their loved ones’ and beneficiaries’ financial security.
How Correct Capital Helps: We assist business owners with exit planning, guiding them in making informed decisions on how to allocate sale proceeds. We focus on defining the purpose of these funds and addressing them from an estate planning perspective, ensuring beneficiaries are considered and taxes are minimized through careful planning.
Other services we offer in Joliet, IL include:
- Family Wealth Planning
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
Tax Planning in Joliet, IL | Correct Capital Wealth Management
At Correct Capital, our Joliet, IL financial advisors and tax planners understand how essential the financial health of your family or business is, both now and in the future. To uphold your trust, we commit to the fiduciary standard and our I.O.U. promise—all advice is independent, objective, and unbiased. As tax regulations evolve, it’s important to work with a team that includes your Joliet, IL financial advisor, tax specialist, and attorney. For assistance with tax planning, retirement planning, or other financial needs in Joliet, IL, reach out to Correct Capital at 877-930-4015 or contact us online.
