Tax Planning
Tax Planning in St. Louis. Tax liability refers to how much you owe in taxes to local, state, and federal authorities. While Uncle Sam will always get some portion of your earnings or profits, there are perfectly legal ways to reduce your tax liability. Tax planning is also essential for successful retirement planning. At Correct Capital, we partner with local St. Louis individuals, families, and businesses to find creative and time-tested ways to reduce their tax burden. Call Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read on to see how prudent tax planning can benefit you.
Tax Planning for St. Louis Individuals and Families
Smart tax planning can help individuals and families increase their retirement savings and afford them more money for both now and the near future. Some things to consider and take advantage of when tax planning in St. Louis include:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked 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 itemize your return, or count up each deduction you're eligible for one by one. The downside is that doing your taxes takes longer, and you have to prove each deduction. A financial planner in St. Louis can help you identify if you are using the standard or itemized deduction.
- Review 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 the money is not taxed until you withdraw it. Roth IRA contributions 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 example, if you expect your taxes to go up in the future, you can transfer money from a traditional IRA to a Roth IRA to pay taxes on the transfer, while allowing the money to grow tax-free.
If you have a 401(k) plan with your employer, you can choose to defer income from your paycheck and have it placed directly in your 401(k). You can contribute up to $20,500 to a 401(k) in 2022, plus an extra $6,500 if you're 50 or older. For 2023, those numbers are $22,500 and $7,500.
If you're self-employed or have freelance income, you can open up an individual retirement plan, such as a One-Participant 401(k) Plan, and deduct your contributions there.
- Tax-Loss Harvesting —
If you sell securities at a loss, you can offset the amount of capital gains tax you would be liable for if other securities sold at a profit. This strategy is more common with short-term capital gains, as the tax rate is often higher than long-term. You can deduct up to $3,000 in capital gains losses per year, but additional losses can be carried over into future years.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can deduct those that exceed 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 says that roughly 95% of married couples file jointly. It's the only way to get certain tax credits and reductions. However, if both spouses are higher-earning individuals, they may be in a lower tax bracket if they file separately. If one spouse has a lot of medical expenses, it may make sense to file separately to meet the 7.5% threshold for medical deductions.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying organizations include:
- Non-profit organizations that are religious, scientific, educational, or for the prevention of cruelty to animals and children
- Veterans' organizations
- A domestic fraternal organization operating under the "lodge system," as long as the funds are used for charity
- Cemetery companies or organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the funds are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, as long as the organization would have been organized as a charity under U.S. law
If you open a Donor-Advised Fund, you can contribute a bulk amount now for an immediate tax reduction, and recommend how the funds are distributed over the years that follow.
If you are over 70½, you can make what's called a qualified charitable distribution by transferring up to $100,000 a year from a traditional IRA directly to a charity tax-free. If you are 72 or older, that donation counts as your required minimum distribution. The donation may reduce both your future required distributions as well as your tax bill.
When you use an experienced financial adviser for your tax planning in St. Louis, you can not only reduce your tax liability this year, but plan out your taxes into retirement. At Correct Capital, we can help put more money in your pocket now while also setting you up for a financially secure future.
Tax Planning for St. Louis Business Owners
Business owners can use effective tax planning to keep more money in their business. Some things to consider when tax planning for your St. Louis business include:
- Review the Structure of Your Business
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 affect both your corporate and your individual tax rate.
- 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 to your employees is a great way to reduce your tax liability. The "SECURE" Act of 2019 changed rules for creating and maintaining retirement plans for both small and large employers, so it may be best to speak to a financial advisor in St. Louis about how those changes affect your tax planning.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While a business owner would have to contribute several hundred thousand dollars per year, the tax saving can be significant.
- 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 such as a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- Use a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and 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 the first 6 months of 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
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can lead to higher employment tax costs. See if your employees would be open to fringe benefits as part of their compensation, instead of just rewarding them with a higher paycheck. Examples that could help reduce your tax liability are 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 certain expenses like travel, meals, or entertainment without having to report them as employee income.
- Look into Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over into another year. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always changing. One benefit of working with a professional St. Louis tax planner is that they will work with you and your tax professional to identify if there are ways to improve your long-term financial success.
Tax Planning in St. Louis | Correct Capital Wealth Management
At Correct Capital, our St. Louis financial advisors and tax planners know how important the financial health of your family or business is, both now and in the future. That is why we hold ourselves to the fiduciary standard and our I.O.U. promise; all the advice we give you will be independent, objective, and unbiased. With tax law always changing, it's important to put a team around you that will help, like your St. Louis financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial needs in St. Louis, call Correct Capital today at 877-930-4015 or contact us online.
