Tax PlanningReduce Your Tax Liability With Correct Capital's Financial Advisors in Brentwood, MO
Tax Planning in Brentwood, MO. Tax liability refers to how much you owe in taxes to local, state, and federal authorities. While taxes may be one of the two certainties in life, The IRS allows for several ways to reduce your tax liability. 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 ways to reduce their tax burden. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us online, or read the article below to see how judicious tax planning can keep more money in your pocket both now and in the future.
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Tax Planning for Brentwood, MO Individuals and Families
Smart 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 Brentwood, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount that you can deduct from your taxable income. 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 itemize your return. The disadvantage is that filing will be more complicated, and you have to prove each deduction.
- Evaluate How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. 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 cannot be deducted from your taxable income, but you will not be taxed on the withdrawal, as long certain requirements are met. Your age, income, and other factors will determine what may be better for you for your tax planning. For example, if you expect your taxes to go up in the future, you can transfer money from a traditional IRA to a Roth IRA to pay taxes on the conversation, 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 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 contribute up to $22,500 with an extra $7,500.
If you're have freelance income, there are also retirement plans available, such as a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you sell securities at a loss, 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 additional losses can be carried over into 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 for a kid'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 file jointly. It helps spouses qualify for a higher standard deduction, in addition to a variety of tax credits not available to single filers. However, if both spouses are higher-earning individuals, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, it may make sense 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. 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 donations are used for charity
- Cemetery organizations
- Any government entities, under the condition that the funds are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. law
If you deposit money in a Donor-Advised Fund, you can deduct a bulk amount now, while still being able to wait to decide how the funds will get distributed down the road.
If you are at least 70½ years of age, you can make what's called a qualified charitable distribution by transferring a maximum of $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 donation counts as your required minimum distribution.
When you consult with an experienced financial planner for your tax planning in Brentwood, MO|With the assistance of 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 Business Owners
Business owners can use effective tax planning to retain more money in their business. Ways to owe less in taxes 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 how much you pay in taxes both as a business and personally.
- 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 consult a financial advisor in Brentwood, MO about how those changes affect your tax planning.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While you must contribute several hundred thousand dollars each year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Merely offering more money can lead to higher taxes for you. See if your employees would be willing to accept other benefits as part of their compensation, instead of just giving them more money. Examples that could help reduce your tax liability are medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
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.
- Put Your Family to Work —
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. You can double how much you're allowed to put into retirement plans if your spouse work for the business.
- Have a Company Vehicle —
If you and your employees need to drive as part of the normal course of your business, you can subtract transportation costs from your taxable profits. 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
- 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
- Look into Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over into subsequent years. 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 changing old ones. One advantage of working with an experienced Brentwood, MO tax planner is that they will work with you and your tax professional to discover if there are ways to strengthen your long-term 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
Tax Planning in Brentwood, MO | Correct Capital Wealth Management
At Correct Capital, our Brentwood, 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; 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 Brentwood, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial needs in Brentwood, MO, call Correct Capital today at 877-930-4015 or contact us online.