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, while we do not provide tax advice, we partner with local St. Louis individuals, families, and businesses to find creative and time-tested ways to reduce their tax burden. For example, we might suggest an individual maximize their deductible employee or employer retirement contributions to lessen 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 2024 the standard deductions are:
- $14,600 for single filers
- $29,200 for married, filing jointly
- $,4,660 for married, filing separately
- $21,900 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 – otherwise known as a Roth conversion – 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). For 2024, you can contribute up to $23,000 to a 401(k), plus an extra $7,500 if you're 50 or older.
If you're self-employed or have freelance income, you can open up an individual retirement plan, such as a Simplified Employee Pension (SEP) IRA or 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 —
Roughly 95% of married couples file jointly. It's the only way to get certain tax credits and reductions. However, if one spouse is a higher-earning individual, 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. Under IRS Publication 526, 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
*According to IRS Publication 526 (2023), Charitable Contributions
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 $105,000 a year from a traditional IRA directly to a charity tax-free. If you are 73 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.
Common Tax Planning Mistakes for Individuals and Families
Effective tax planning is an important part of your family's financial well-being. However, many people inadvertently make mistakes that can lead to higher tax liabilities or missed opportunities for savings. Here are some common tax planning errors and how Correct Capital can help you avoid them:
- Not Maximizing Retirement Contributions —
Failing to contribute the maximum allowable amounts to tax-advantaged retirement accounts like Traditional IRAs, Roth IRAs, or 401(k) plans can result in missed tax deductions and less growth over time.
How Correct Capital Helps: We assess your financial situation to ensure you're contributing the amount you're able to, reducing your taxable income while building a solid retirement foundation.
- Overlooking Available Tax Credits and Deductions —
Many individuals miss out on valuable 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 determine if you've properly claimed available credits and deductions, in an attempt to maximize your refund (if applicable) or reduce the amount you owe.
- Poor Record-Keeping —
Disorganized financial records can lead to missed deductions and complications during tax filing. Without proper documentation, you might be unable to substantiate claims if audited.
How Correct Capital Helps: We help you implement efficient record-keeping systems and find needed documentation, ensuring all receipts and documents are organized and accessible when needed.
- Ignoring Tax-Efficient Investment Strategies —
Not considering the tax implications of investment decisions can erode your returns. This includes neglecting asset location strategies or failing to harvest tax losses.
How Correct Capital Helps: We provide guidance on tax-efficient investing, helping you choose the right investment vehicles and strategies to minimize taxes on dividends, interest, and capital gains.
- Failing to Plan for Life Changes —
Major life events like marriage, divorce, having a child, or buying a home can significantly impact your tax situation. Ignoring these changes can result in unexpected tax liabilities.
How Correct Capital Helps: We work with you to adjust your tax planning strategies in response to life events, ensuring you take advantage of new deductions or credits and remain compliant with tax laws.
- Underestimating Estimated Tax Payments —
If you have income not subject to withholding—such as freelance work or investment income—you may need to make estimated tax payments. Failing to do so can result in penalties.
How Correct Capital Helps: We assist in building your cash reserves to meet your estimated tax payments so you can penalties and interest charges.
- Not Utilizing Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) —
HSAs and FSAs offer tax advantages for medical expenses, but many eligible individuals fail to contribute, missing out on tax savings.
How Correct Capital Helps: We advise on the benefits of HSAs and FSAs and whether they apply to your situation, helping you set aside pre-tax dollars for healthcare costs and reduce 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 guide you through setting up education savings accounts that offer tax-deferred growth and potential state tax deductions.
- Not Reviewing Withholding Allowances —
Having too much or too little tax withheld from your paycheck can lead to large refunds or unexpected tax bills.
How Correct Capital Helps: We help you adjust your W-4 form to ensure accurate withholding, improving your cash flow and preventing surprises at tax time.
- Missing Opportunities for Charitable Contributions —
Failing to document or strategize charitable donations can result in lost deduction opportunities.
How Correct Capital Helps: We assist in planning your charitable giving to maximize tax benefits, including assisting with Qualified Charitable Distributions (QCDs) if you're eligible.
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 $14,600, 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 67 cents per mile (for both gas and electric vehicles); 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.
Common Tax Planning Mistakes for Businesses
Efficient tax planning helps businesses of all sizes to reduce their liabilities and improve profitability. However, many businesses fall into common tax pitfalls that can lead to higher taxes, missed deductions, and even penalties. Below are the most frequent tax planning mistakes businesses make and how Correct Capital can help avoid them.
- Not Paying Estimated Quarterly Taxes —
Businesses might overlook or underpay quarterly estimated taxes, leading to penalties and interest from the IRS. This is particularly common among small businesses, freelancers, or companies with fluctuating income.
How Correct Capital Helps: We assist businesses in accurately calculating and scheduling estimated tax payments, ensuring that you stay compliant with IRS deadlines and avoid unnecessary penalties.
- Neglecting Retirement Plan Contributions for Owners and Employees —
Many businesses do not take full advantage of retirement plan contributions as a way to reduce taxable income. Plans like 401(k)s, SEP IRAs, and Solo 401(k)s can offer significant tax benefits for both owners and employees.
How Correct Capital Helps: We work with businesses to set up and optimize retirement plans that reduce taxes while attracting and retaining talent.
- Not Planning for Profitability and Cash Flow —
Many businesses focus solely on minimizing their current tax bill without planning for long-term growth and profitability. This short-term focus can lead to missed opportunities for strategic investments or tax-efficient growth strategies.
How Correct Capital Helps: We provide comprehensive tax planning that goes beyond immediate deductions to help businesses plan for future growth, reinvest profits, and manage cash flow efficiently.
- Neglecting Exit and Estate Planning —
Business owners often fail to create a succession plan for the financial aspects of selling their business. While they may be focused on operations, they might overlook how to manage and allocate the proceeds from the eventual sale in a tax-efficient way. Additionally, without proper estate planning, owners may miss opportunities to ensure their beneficiaries and loved ones are adequately addressed.
How Correct Capital Helps: We assist business owners with exit planning, helping them make informed decisions about where to allocate the proceeds from a sale. We focus on identifying the purpose of the funds and addressing them from an estate planning perspective. This ensures that beneficiaries are properly considered and that taxes are minimized through thoughtful planning.
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.
