Reduce Your Tax Liability With Correct Capital's Financial Advisors in Belleville, IL
Tax Planning in Belleville, IL. Tax liability is how much you owe in taxes to local, state, and federal governments. Even though Uncle Sam will always get 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 key for successful retirement planning. At Correct Capital, we work with local Belleville, IL individuals, families, and businesses to find creative and proven ways to reduce their tax burden. Speak to Correct Capital's financial and fiduciary advisors today at 314-930-401(k), reach out through our website, or read the article below to see how diligent tax planning can keep more money in your account both now and in the future.
Tax Planning for Belleville, IL Individuals and Families
Diligent 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 consider when tax planning in Belleville, IL include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat figure that ensures all tax payers have at least some income that won't be taxed. In 2022 and 2023, the standard deductions are:
- $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 count up each deduction you're eligible for one by one. 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.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Savings you put into a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Savings put into a Roth IRA 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 whether a Traditional or Roth IRA is preferable for your tax planning. For example, if you anticipate have more tax liability down the road, you can convert savings from a traditional IRA to a Roth IRA to pay taxes on the transfer, 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, or up to $27,000 if you're 50 or older. For 2023, you can deposit as much as $22,500 or $30,000.
If you're self-employed, there are also retirement plans available, such as 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. 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 write off 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 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 choose to file joint tax returns. 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 substantial earnings, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, it may be preferable to file separately to meet the 7.5% limit for unreimbursed medical expenses.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Accepted charities are:
- 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 donations are used for charity
- Cemetery organizations
- Any government entities, as long as the donations are meant to benefit the public
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization meets the criteria for a charity under United States law
If you save 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 known as a qualified charitable distribution by transferring no more than $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 use an experienced financial planner for your tax planning in Belleville, IL|With the help a financial planner in Belleville, IL, they can help put more money in your pocket now while also setting you up for a financially secure future.
Tax Planning for Belleville, IL 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 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 affect how much you pay in taxes both as a business and individually.
- Evaluate Your Employees' Employer-Sponsored Retirement Plans —
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's recommended to meet with a financial advisor in Belleville, IL about how they may apply to your business.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While you must contribute several hundred thousand dollars per year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Just offering more money can lead to higher taxes for you. Talk to your employees about whether or not they would be open to other benefits as part of their compensation, instead of just giving them a higher paycheck. Common fringe benefits include medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, more paid time off, or continuing education reimbursement.
You can also set up 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 them start saving for retirement through an account such as a ROTH IRA. You can double how much you're allowed to put into retirement plans by having 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 6 months of 2022) or 62.5 cents per mile (for the last half of 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
- Look into Tax Loss Carryover —
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.
US lawmakers are always making new tax laws for businesses, or adjusting old ones. One advantage 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 strengthen your long-term financial success.
Other services we offer in Belleville, IL include:
- Small Business Retirement Plans
- Social Security Consultants Near Me
- Retirement Calculator
- Retirement Planning
- Rollover 401(k)
- Wealth Management
- 401k Companies
- Financial Advisor
- Asset Management
Tax Planning in Belleville, IL | Correct Capital Wealth Management
At Correct Capital, our Belleville, IL tax planners know strong financial health is essential 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 Belleville, IL financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Belleville, IL, call Correct Capital today at 314-930-401(k) or contact us online.