Tax Planning
Tax Planning in Brentwood, MO. Tax liability is how much you owe in taxes to local, state, and federal entities. 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 important for successful retirement planning. At Correct Capital, we partner with Brentwood, MO individuals, families, and businesses in the Brentwood, MO area to find creative and time-tested strategies for reducing their tax burden. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us online, or read on to see how diligent tax planning can keep more money in your account both now and in the future.
Tax Planning for Brentwood, MO Individuals and Families
Prudent tax planning is essential for individuals and families who want to put more in their retirement accounts and have extra money for the short-term. Ways to reduce your tax liability when tax planning in Brentwood, MO are:
- 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, the standard deductions are:
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 count up each deduction you're eligible for one by one. The disadvantage is that filing will be more complicated, 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 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. Savings put into a Roth IRA are not deductible, but the money grows tax free. Your age, income, and other factors will determine whether a Traditional or Roth IRA is preferable in terms of tax planning. For example, if you expect your taxes to go up down the road, you can transfer 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 with your employer, 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 at least 50 years old. For 2023, you can deposit as much as $22,500 or $30,000.
If you're have freelance income, you can open up an individual retirement plan, 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 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 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 in future years.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can write off those that exceed 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 in order to qualify 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's the only way to get certain tax credits and reductions. However, if both spouses earn high incomes, 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% threshold for unreimbursed medical expenses.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Accepted charities 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 donations are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the funds are meant to benefit the public
- In many cases, a Canadian, Mexican, or Israeli organization, under the condition that the organization meets the criteria for a charity under United States law
If you deposit money in a Donor-Advised Fund, you can get a tax reduction by putting money into it now, while still being able to wait to decide how the funds will get distributed in the future.
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 a knowledgeable financial adviser for your tax planning in Brentwood, MO|With the help a financial planner in Brentwood, MO, you can not only reduce your tax liability this year, but understand how to get further benefits once you retire.
Tax Planning for Brentwood, 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 Brentwood, MO business include:
- Review the Structure of Your Business —
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 both your corporate and your individual tax rate.
- Review 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 may be best to speak to a financial advisor in Brentwood, 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 contribute several hundred thousand dollars annually, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Merely offering raises can lead to higher taxes for you. See if your employees would be open to fringe benefits rather than just giving them more money. Common fringe benefits include medical insurance, group life insurance, help with childcare expenses, transportation reimbursement, meals, sick leave, or paying for career-boosting courses.
You can also set up accountable plans to reimburse employees for business expenses 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 begin to save in a vehicle such as a ROTH IRA. If both you and your spouse work for 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. 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 the last six months of 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and figure out whether those allow you to deduct more than the standard mileage rate would have
- Consider Carryover Deductions —
You're allowed to carryover some deductions 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 benefit of working with a professional Brentwood, MO tax planner is that they will work with you and your tax professional to discover if there are ways to strengthen your personal and business financial success.
Other services we offer in Brentwood, 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 Brentwood, MO | Correct Capital Wealth Management
At Correct Capital, our Brentwood, 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 Brentwood, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial services in Brentwood, MO, call Correct Capital today at 877-930-4015 or contact us online.
