Reduce Your Tax Liability With Correct Capital's Financial Advisors in Ballwin, MO
Tax Planning in Ballwin, MO. Tax liability is how much taxes you will need to pay to local, state, and federal authorities. Even though Uncle Sam will always get some percentage of your earnings or profits, The IRS allows for several ways you can reduce how much you owe. Tax planning is also essential for successful retirement planning. At Correct Capital, we partner with local Ballwin, MO individuals, families, and businesses to find creative and time-tested strategies for reducing their tax burden. Speak to Correct Capital's financial and fiduciary advisors today at 314-930-401(k), contact us online, or read the article below to see how judicious tax planning can benefit you.
Tax Planning for Ballwin, MO Individuals and Families
Prudent tax planning is essential for individuals and families who want to increase their retirement savings and have extra money for the short-term. Some things to take advantage of when tax planning in Ballwin, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked figure that reduces the amount of income you are taxed on. In 2022 and 2023, that flat-rate is:
- $12,950 for single filers
- $25,900 for married, filing jointly
- $12,950 for married, filing separately
- $19,400 for head of household
- $13,850 for single filers
- $27, 700 for married, filing jointly
- $13,850 for married, filing separately
- $20,800 for head of household
If more income that shouldn't be taxed than the above, you can itemize your return. The downside is that doing your taxes takes longer, and you will have to document why you are eligible for the deduction when you send your returns.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Money you put into a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Money put into a Roth IRA cannot be deducted from your taxable income, 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 convert 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 contribute to a 401(k) plan through your work, you can choose to defer income from your paycheck and have it placed directly in your 401(k). You can place up to $20,500 to a 401(k) in 2022, or as much as $27,000 if you're at least 50 years old. For 2023, you can contribute up to $22,500 or $30,000.
If you're self-employed, you can open up an individual retirement plan, like a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, you can use that loss to reduce your taxable capital gains. This strategy is utilized more with short-term capital gains, as the tax rate is typically higher than long-term. The maximum deductible amount is $3,000 per year, but you may be able to deduct higher losses in future years.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can write off those that are greater than 7.5% of your adjusted gross income. Paying property taxes early can also lead to deductions, and you can pay tuition to an undergraduate, graduate and professional degree courses for your or a child, as well as courses that improve your job skills for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
More than 9 out of 10 married couples file jointly. It helps couples qualify for a higher standard deduction, in addition to a variety of tax credits not available to single filers. But, if both spouses have a high income, they may be in a lower tax bracket if they file separately. If one spouse has a lot of medical expenses, it may be preferable to file separately to qualify for the 7.5% threshold for medical deductions.
- Contribute to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying charities include:
- 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," under the condition that the funds are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the funds are meant to benefit the public
- In many cases, a Canadian, Mexican, or Israeli organization, as long as the organization meets the criteria for a charity under United States law
If you open a Donor-Advised Fund, you can contribute a large amount now for an immediate tax reduction, and recommend how the funds are distributed over the years that follow.
If you are older than 70½, you can make what's known as a qualified charitable distribution by transferring up to $100,000 a year from a traditional IRA directly to a charity without having to pay taxes on it. If you are 72 or older, that donation qualifies as your required minimum distribution.
When you use an experienced financial planner for your tax planning in Ballwin, MO|With the assistance of a financial planner in Ballwin, MO, they can help put more money in your pocket now while also setting you up for a financially secure future.
Tax Planning for Ballwin, MO Businesses
With prudent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Ballwin, MO business include:
- Assess How Your Business Is Structured —
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 retirement plans not only attracts and retains talent, but it also allows you to deduct contributions. The "SECURE" Act of 2019 offers new benefits for employers who offer 401(k)s and SIMPLE IRAs with automatic enrollment, so it's likely in your best interest to speak to a financial advisor in Ballwin, MO about how they may apply to your business.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan|a good idea if you and your employees are both higher-earning}. While you would need to contribute several hundred thousand dollars annually, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can result in higher employment tax costs. Talk to your employees about whether or not they would be willing to accept fringe benefits rather than just giving them a higher paycheck. Common fringe benefits include medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, sick leave, or paying for courses that help in their career.
You can also use accountable plans to reimburse employees for business expenses without having to report them as employee income.
- 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.
- Buy a Company Vehicle —
If you and your employees need to drive as part of the normal course of your business, you can deduct the transportation costs. There are two different ways of deducting those expenses:
- 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 whether those allow you to deduct more than the standard mileage rate would have
- 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. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Congress are always making new tax laws for businesses, or adjusting old ones. A key advantage of consulting with an experienced Ballwin, MO tax planner is that they will work with you and the person who prepares your taxes to discover if there are ways to improve your long-term financial success.
Other services we offer in Ballwin, MO include:
Tax Planning in Ballwin, MO | Correct Capital Wealth Management
At Correct Capital, our Ballwin, MO financial advisors know strong financial health is key to your overall success. 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, it's important to put a team around you that will help, like your Ballwin, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial needs in Ballwin, MO, call Correct Capital today at 314-930-401(k) or contact us online.