Tax Planning
Tax Planning in Amarillo, TX. Tax liability refers to the amount 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 don’t offer tax advice, but we work alongside local Amarillo, TX individuals, families, and businesses to find inventive and reliable ways to lower their tax liability. We could suggest maximizing deductible retirement contributions, which could reduce tax costs. 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.
Tax Planning for Amarillo, TX Individuals and Families
Effective tax strategies can help individuals and families build their retirement savings and provide them with more money for both today and in the near future. A few things to consider when tax planning in Amarillo, TX:
- 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 are higher than these thresholds, itemizing—adding each eligible deduction individually—may be beneficial. The drawback is that itemizing can be time-consuming and requires proof of each deduction. A financial planner in Amarillo, TX can assist in determining whether using the standard deduction or itemizing is more advantageous.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both present unique tax benefits. With a traditional IRA, your contributions may be deductible, and you defer taxes until you take distributions. Unlike traditional IRAs, Roth IRA contributions are non-deductible, but your funds grow without future taxes. The ideal choice depends on your personal financial and tax situation. If you expect future tax rates to increase, a Roth conversion, or moving funds from a traditional IRA to a Roth IRA, might be wise to lock in tax-free growth while paying taxes upfront.
If you have a 401(k) plan with your employer, you can defer income from your paycheck directly to your 401(k). The 401(k) contribution limit for 2024 is $23,000, along with an additional $7,500 for individuals 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, enabling 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 strategy is commonly used with short-term capital gains, as these are usually taxed more heavily 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 —
If you have unreimbursed medical expenses, you may be able to deduct amounts exceeding 7.5% of your adjusted gross income. 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 —
You can deduct up to 60% of your adjusted gross income by making donations to certain organizations. Under IRS guidelines, the following types of organizations may qualify:
- Religious, scientific, educational, or anti-cruelty non-profit organizations for animals and children
- Organizations dedicated to veterans
- Fraternal organizations under a "lodge system" provided funds are used for charity
- Non-profits or companies associated with cemeteries
- Federal, state, local, or Native government entities, provided funds are for public purposes
- Canadian, Mexican, or Israeli organizations, provided they meet U.S. charity qualifications
*According to IRS Publication 526 (2023), Charitable Contributions
If you start a Donor-Advised Fund, you’re able to contribute a significant amount right away for an instant tax deduction and suggest distributions over the coming years.
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. At age 73 and over, this donation meets the requirements for your required minimum distribution and could lessen both future required distributions and your tax bill.
Using a skilled financial adviser for tax planning in Amarillo, TX not only helps lower your tax bill this year but also lays out a strategy for retirement taxes. At Correct Capital, our goal is to help you save now and position yourself for financial stability in the future.
Common Tax Planning Mistakes for Amarillo, TX Individuals and Families
Smart tax planning is vital for your family’s overall financial security. Yet, many people unintentionally make errors that could result in higher tax liabilities or missed savings opportunities. 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: 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 —
Valuable tax credits and deductions—like the Earned Income Tax Credit, Child Tax Credit, and deductions for medical and educational expenses—are often overlooked by individuals.
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: 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 —
Neglecting tax-efficient investment strategies, such as asset location or tax-loss harvesting, can erode overall returns.
How Correct Capital Helps: Our team provides insight on tax-efficient investment choices, assisting you in minimizing taxes on dividends, interest, and capital gains through strategic asset selection.
- Failing to Plan for Life Changes —
Major life events like marriage, divorce, having a child, or buying a home can have a substantial impact on your tax situation. 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 —
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: We offer guidance on the benefits of HSAs and FSAs, assessing whether they suit your circumstances and helping you allocate pre-tax dollars for healthcare expenses to lower taxable income.
- Overlooking Education Savings Plans —
By not using options like 529 plans, you could miss out on tax benefits that aid in 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 —
Having too much or too little tax withheld from your paycheck can lead to either a large 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 —
If you don’t track or plan your charitable contributions, you could lose valuable deduction opportunities.
How Correct Capital Helps: We help you plan charitable donations to take full advantage of tax benefits, offering assistance with Qualified Charitable Distributions when applicable.
Tax Planning for Amarillo, TX Business Owners
Business owners in Amarillo, TX can utilize tax planning strategies to maximize retained earnings in their business. Keep the following in mind for effective tax planning for your Amarillo, TX 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 —
Providing retirement plans such as 401(k)s, 403(b)s, or other defined contribution plans is an effective way to reduce tax liability. With changes under the "SECURE" Act of 2019, speaking to a financial advisor in Amarillo, TX about retirement plan tax benefits is recommended.
If you’re a high-earning business owner with high-income employees, a Cash Balance Pension Plan could be advantageous, though it requires large contributions.
- Have Your Family Work For The Business —
Hiring family members can bring tax benefits. Children can work for you tax-free up to $14,600, and they can 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 the nature of your Amarillo, TX business, you and your employees may be able to use a company vehicle and deduct the transportation costs. There are two options for claiming this deduction:
- Deduct 67 cents per mile using the standard mileage rate, which applies to gas and electric vehicles alike; or
- Keep a record of actual expenses, including maintenance, registration, and gas, to see if this results in a larger deduction than the standard mileage rate.
- Consider Fringe Benefits For Your Employees —
Boosting employee wages often results in higher employment taxes. See if employees are open to receiving fringe benefits as part of their pay package rather than a higher paycheck. 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.
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. Potential carryover deductions are home office deductions, net operating losses, business credits, and capital losses.
Tax laws for businesses are constantly evolving. Partnering with a professional tax planner in Amarillo, TX means they work with you and your tax expert to identify strategies for enhancing long-term financial outcomes.
Common Tax Planning Mistakes for Amarillo, TX Businesses
Effective tax planning allows businesses of all sizes to reduce tax liabilities and increase 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. This is especially common among small businesses, freelancers, or companies with variable income.
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 businesses don’t fully utilize retirement plan contributions as a way to lower taxable income. Plans like 401(k)s, SEP IRAs, and Solo 401(k)s can provide substantial tax benefits for both owners and employees.
How Correct Capital Helps: Our team helps set up and optimize retirement plans that lower taxes and serve as a tool for recruiting and retaining employees.
- Not Planning for Profitability and Cash Flow —
Some businesses only focus on minimizing their current tax bill, neglecting long-term growth and profitability. This approach can prevent businesses from taking advantage of strategic investment or growth opportunities.
How Correct Capital Helps: We deliver thorough tax planning to support future growth, optimize reinvestment, and ensure efficient cash flow management.
- Neglecting Exit and Estate Planning —
Business owners often fail to create a succession plan to address the financial aspects of selling their business. Often focused on day-to-day business, owners can overlook how to handle proceeds from a sale to minimize taxes. Additionally, without estate planning, owners may miss opportunities to ensure beneficiaries and loved ones are taken care of.
How Correct Capital Helps: We provide assistance in exit planning, helping business owners determine where to allocate sale proceeds. Our approach involves identifying the purpose of the funds and applying estate planning strategies, which consider beneficiaries and minimize taxes.
Other services we offer in Amarillo, TX 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 Amarillo, TX | Correct Capital Wealth Management
Correct Capital’s financial advisors and tax planners in Amarillo, TX recognize the importance of financial well-being for your family or business, today and into the future. That’s why we adhere to the fiduciary standard and our I.O.U. promise: all the advice we offer is independent, objective, and unbiased. With tax laws constantly evolving, it’s essential to have a strong team in place, including your Amarillo, TX financial advisor, tax professional, and attorney. For support with tax planning, retirement planning, or any other financial concerns in Amarillo, TX, contact Correct Capital at 877-930-4015 or reach out online.
