Tax Planning
Tax Planning in Ballwin, MO. Tax liability is how much you owe in taxes to local, state, and federal governments. While Uncle Sam will always get some portion of your earnings or profits, The IRS allows for several ways to reduce your tax liability. Tax planning is also essential for successful retirement planning. At Correct Capital, we partner with Ballwin, MO individuals, families, and businesses in the Ballwin, MO area to find creative and proven strategies for reducing how much they owe. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out online, or read the article below to discover how diligent tax planning can keep more money in your pocket both now and down the road.
Tax Planning for Ballwin, MO Individuals and Families
Smart tax planning is essential for individuals and families who want to put more in their retirement accounts and afford them more money for both now and the near future. Ways to reduce how much you owe when tax planning in Ballwin, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked figure that ensures all tax payers have at least some income that won't be taxed. 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 it will take longer to fill out your return, and you have to prove each deduction.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Savings you put into a traditional IRA can be deducted from your taxable income, and the money is not taxed until you withdraw it. Roth IRA contributions are not deductible, but you will not be taxed on the withdrawal, as long certain requirements are met. Your age, income, and other factors will determine which type of account is preferable in terms of tax planning. For example, if you anticipate being in a higher tax bracket down the road, 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 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 contribute up to $20,500 to a 401(k) in 2022, plus an extra $6,500 if you're 50 or older. For 2023, you can deposit as much as $22,500 or $30,000.
If you're have freelance income, there are also retirement plans available, like a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you sell stocks, bonds, or options at a loss, 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 often higher than long-term. The maximum deductible amount is $3,000 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 higher 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 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 —
The IRS reports that roughly 95% of married couples file jointly. It's the only way to get certain tax credits and reductions. However, if both spouses have a high income, they may be in a lower tax bracket if they file separately. If one spouse received considerable medical care in a given year, it may make sense to file separately to meet 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, as long as the funds are for public use
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization would have been organized as a charity under U.S. law
If you deposit money in 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 referred to as a qualified charitable distribution by transferring no more than $100,000 a year from a traditional IRA directly to a non-profit organization without having to pay taxes on it. If you are 72 or older, that transfer counts as your required minimum distribution.
When you consult with a knowledgeable 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 this year while also setting you up for a financially secure retirement.
Tax Planning for Ballwin, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Ways to owe less in taxes when tax planning for your Ballwin, MO business include:
- Assess 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 have consequences for both your corporate and your individual tax rate.
- Review Your Employees' Employer-Sponsored Retirement Plans —
There are many benefits to offering employees a retirement plan, and reducing your tax liability is chief among them. The "SECURE" Act of 2019 changed rules for creating and maintaining retirement plans for both small and large employers, so it's recommended to meet with a financial advisor in Ballwin, MO about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While a business owner must considerable sums of money per year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Just offering raises can result in higher taxes for you. See if your employees would be willing to accept other benefits as part of their compensation, instead of just rewarding them with a raise. Examples that could help reduce your tax liability are medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or paying for courses that help in their career.
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.
- Have Your Family Work For The Business —
Your kids 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. You can double your retirement plan contributions if your spouse work for the business.
- 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 costs:
- 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 the last half of 2022); or
- Document your actual expenses, like maintenance, registration fees, and gas, and determine whether those allow you to deduct more than the standard mileage rate would have
- Consider 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.
US lawmakers are always making new tax laws for businesses, or changing old ones. One advantage of working with a knowledgeable Ballwin, MO tax planner is that they will work with you and the person who prepares your taxes to identify if there are ways to strengthen your personal and business financial success.
Other services we offer in Ballwin, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
- 401(k) For Small Business
- Small Business Retirement Plans
- Social Security Consultants Near Me
Tax Planning in Ballwin, MO | Correct Capital Wealth Management
At Correct Capital, our Ballwin, MO financial advisors know how important the financial health of your family or business is, both now and in the future. That's why we give our I.O.U. promise; you will only hear recommendations that are independent, objective, and unbiased. With tax law always changing, it's important to put a team around you that will help, like your Ballwin, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial services in Ballwin, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
