Tax Planning
Tax Planning in Belleville, IL. Tax liability is how much taxes you will need to pay to local, state, and federal governments. Even though taxes may be one of the two certainties in life, there are perfectly legal ways to reduce how much money you have to pay. Tax planning is also key to planning the golden years of your dreams. At Correct Capital, we work with Belleville, IL individuals, families, and businesses in the Belleville, IL area to find creative and time-tested strategies for reducing how much they owe. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out through our website, or read on to see how diligent tax planning can benefit you.
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Tax Planning for Belleville, IL Individuals and Families
Diligent 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 your tax liability when tax planning in Belleville, IL include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount that reduces the amount of income you are taxed on. 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 more income that shouldn't be taxed than the above, you can count up each deduction you're eligible for individually. The downside is that it will take longer to fill out your return, and you will have to document why you are eligible for the deduction when you send your returns.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Money you put into a traditional IRA can be deducted from your taxable income, and you pay taxes on it when you withdraw it. Money put into a Roth IRA do not affect your taxable income, but you will not be taxed on the withdrawal, as long as you are over 59 1/2 and have had the account for at least five years. Your age, income, and other factors will determine what may be better for you for your tax planning. For instance, if you anticipate being in a higher tax bracket in the future, you can move savings from a traditional IRA to a Roth IRA to pay taxes on the conversation, and enjoy tax-free withdrawals when you need the money in retirement.
If you have 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, plus an extra $6,500 if you're 50 or older. For 2023, you can contribute 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 the savings you put there from your taxable income.
- Tax-Loss Harvesting —
If you sell stocks, bonds, or options at a loss, you can offset the amount of capital gains tax you would be liable for if other securities sold at a profit. Tax-loss harvesting is more common with short-term capital gains, as the tax rate is typically 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 medical expenses your insurance didn't cover, you can deduct those that are higher than 7.5% of your adjusted gross income. Paying property taxes early can also help you reduce your taxable income, 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 —
The IRS says that roughly 95% of married couples file jointly. It's the only way to qualify for certain tax credits and reductions. But, if both spouses have a high income, they may be in a lower tax bracket if they file separately. If one spouse received substantial medical treatment in a given year, it may make sense to file separately to qualify for the 7.5% threshold for unreimbursed medical expenses.
- Contribute to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Accepted 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 money are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the donations are for public use
- 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 deposit money in 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 over 70½, you can make what's called a qualified charitable distribution by transferring up to $100,000 a year from a traditional IRA directly to a charity tax-free. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you consult with an experienced financial planner for your tax planning in Belleville, IL|With the help a financial adviser in Belleville, IL, you can not only reduce your tax liability this year, but plan out your taxes into retirement.
Tax Planning for Belleville, IL Business Owners
Business owners can use effective tax planning to retain more money in their business. Some things to consider when tax planning for your Belleville, IL business include:
- Review 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 have consequences for both your corporate and your individual tax rate.
- Evaluate 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 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 Belleville, IL 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 must considerable sums of money annually, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Only offering raises can lead to higher employment tax costs. Ask your employees if they would be willing to accept other 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, sick leave, or continuing education reimbursement.
You can also use accountable plans to pay employees back 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 like a ROTH IRA. You can double how much you're allowed to put into retirement plans 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. You can make the deduction in two ways:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for the first half of 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 determine if your deduction would be more than the standard mileage rate
- Consider Carryover Deductions —
You're allowed to carryover some deductions into subsequent years. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. A key benefit of consulting with an experienced Belleville, IL tax planner is that they will work with you and your tax professional to identify if there are ways to improve your personal and business financial success.
Other services we offer in Belleville, IL include:
Tax Planning in Belleville, IL | Correct Capital Wealth Management
At Correct Capital, our Belleville, IL financial advisors know strong financial health is essential to your overall success. That's why we give 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 Belleville, IL financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial needs in Belleville, IL, call Correct Capital today at 877-930-4015 or contact us online.
