Tax Planning
Tax Planning in Arnold, MO. Tax liability is how much you owe in taxes to local, state, and federal authorities. Even though Uncle Sam will always collect some percentage of your earnings or profits, The IRS allows for several ways to reduce how much money you have to pay. Tax planning is also important to planning the golden years of your dreams. At Correct Capital, we work with Arnold, MO individuals, families, and businesses in the Arnold, MO area to find creative and time-tested strategies for reducing their tax burden. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out online, or read on to learn how diligent tax planning can keep more money in your pocket both now and in the future.
Tax Planning for Arnold, MO Individuals and Families
Prudent tax planning is essential for individuals and families who want to increase their retirement savings and afford them more money for both now and the near future. Ways to reduce your tax liability when tax planning in Arnold, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar figure that you can deduct from your taxable income. In 2022 and 2023, that flat-rate is:
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. The disadvantage is that filing will be more complicated, and you have to prove each deduction.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Contributions to a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Savings put into a Roth IRA do not affect your taxable income, but you will not be taxed on the withdrawal, as long certain requirements are met. Your unique situation will determine what may be better for you in terms of tax planning. For instance, if you expect your taxes to go up down the road, you can move 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 through your job, you can choose to have earnings deposited into your 401(k) account instead of it going to your paycheck. You can place up to $20,500 to a 401(k) in 2022, or up to $27,000 if you're at least 50 years old. For 2023, you can deposit up to $22,500 with an extra $7,500.
If you're have freelance income, you can open up an individual retirement plan, like a One-Participant 401(k) Plan, and you can deduct the money you put there from your taxable income.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, you can use that loss to reduce your taxable capital gains. Tax-loss harvesting is utilized more with short-term capital gains, as the tax rate is usually higher than long-term. You can deduct up to $3,000 in capital gains losses per year, but you may be able to deduct higher losses down the road.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can deduct those that are greater than 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 child's tuition or for career-boosting classes for you early for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
More than 9 out of 10 married couples file jointly. It helps spouses qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. But, if both spouses have a high income, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, it may make sense to file separately to qualify for the 7.5% limit for unreimbursed medical expenses.
- Contribute to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying charities are:
- Non-profit organizations that are religious, scientific, educational, or dedicated to the prevention of cruelty to animals and children
- Veterans' organizations
- A domestic fraternal organization operating under the "lodge system," as long as the donations are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the funds are for public use
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. law
If you start 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 known as a qualified charitable distribution by transferring a maximum of $100,000 a year from a traditional IRA directly to a non-profit organization tax-free. If you are 72 or older, that transfer counts as your required minimum distribution.
When you consult with a knowledgeable financial adviser for your tax planning in Arnold, MO|With the help a financial adviser in Arnold, MO, you can not only reduce your tax liability this year, but understand how to get further benefits once you retire.
Tax Planning for Arnold, MO Businesses
Business owners can use smart tax planning to keep more money in their business. Some things to consider when tax planning for your Arnold, MO business include:
- Assess How Your Business Is Structured —
There are many things to consider when deciding how to structure or restructure your business. Structuring your business as an LLC, sole proprietorship, partnership, or S or C corporation will affect how much you pay in taxes both as a business and personally.
- Evaluate the Retirement Plans You Offer Employees —
Offering your employees retirement plans, such as 401(k)s, 403(b)s, and other defined contribution plans 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's recommended to speak to a financial advisor in Arnold, MO about how those changes affect your tax planning.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While you would have to contribute several hundred thousand dollars per year, the tax saving can be significant.
- 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 rather than just giving them more money. Examples that could help reduce your tax liability are medical insurance, group life insurance, help with childcare expenses, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also use accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without having to report them as employee income.
- Put Your Family On the Payroll —
If you get your children on the payroll, they do not have to pay taxes on their first $12,000 in income, and you can help kick-start their retirement savings through an account such as a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- Have a Company Vehicle —
If you and your employees need to drive as part of the normal course of your business, you can subtract transportation costs from your taxable income. You can make the deduction in two ways:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for January to June in 2022) or 62.5 cents per mile (for July to December in 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
- 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 in flux. A key benefit of working with a professional Arnold, MO tax planner is that they will work with you and the person who prepares your taxes to discover if there are ways to strengthen your personal and business financial success.
Other services we offer in Arnold, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
- 401(k) For Small Business
Tax Planning in Arnold, MO | Correct Capital Wealth Management
At Correct Capital, our Arnold, MO financial advisors 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: we are legally and ethically bound to do what's best for you and only you. With tax law always changing, you need a team around you that will help, like your Arnold, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial needs in Arnold, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
