Tax Planning
Tax Planning in Central West End, MO. Tax liability is how much you owe in taxes 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 partner with Central West End, MO individuals, families, and businesses in the Central West End, MO area to find creative and proven ways to reduce their tax burden. Speak to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read on to learn how diligent tax planning can keep more money in your account both now and down the road.
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Tax Planning for Central West End, MO Individuals and Families
Smart tax planning can help individuals and families increase their retirement savings and afford them more money for both now and the near future. Ways to reduce your tax liability when tax planning in Central West End, MO include:
- 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, 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 drawback is that doing your taxes takes longer, and you have to prove each deduction.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Contributions to 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 cannot be deducted from your taxable income, but the money grows tax free. 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 down the road, you can transfer savings 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 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 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 stocks, bonds, or options at a loss, you can use that loss to reduce your taxable capital gains. This strategy is more common with short-term capital gains, as the tax rate is usually 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 medical expenses your insurance didn't cover, you can deduct those that exceed 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 in order to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
More than 9 out of 10 married couples file jointly. It's the only way to get certain tax credits and reductions. 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% limit 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 for the prevention of cruelty to animals and children
- Veterans' organizations
- A domestic fraternal organization operating under the "lodge system," as long as the funds are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the funds are meant to benefit the public
- 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 start 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 no more than $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 adviser for your tax planning in Central West End, MO|With the help a financial adviser in Central West End, 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 Central West End, 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 Central West End, MO business include:
- Evaluate 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 affect both your corporate and your individual tax rate.
- Review Your Employees' Employer-Sponsored Retirement Plans —
Offering your employees retirement plans, such as 401(k)s, 403(b)s, and other defined contribution plans is a great way to reduce your tax liability. The "SECURE" Act of 2019 offers new benefits for employers who offer certain retirement plans, so it's likely in your best interest to meet with a financial advisor in Central West End, MO about how they may apply to your business.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While you must significant sums of money per year, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Merely offering more money can lead to higher employment tax costs. See if your employees would be open to other benefits as part of their compensation, instead of just rewarding them with a raise. Common fringe benefits include 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 counting the reimbursement as income.
- Have Your Family Work For The Business —
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 like a ROTH IRA. If both you and your spouse work for the business, you can double your retirement plan contributions.
- Buy a Company Vehicle —
Depending on the specifics of your business, you and your employees may be able to use a company vehicle and subtract transportation costs from your taxable profits. There are two different ways of deducting those expenses:
- 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 figure out 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 subsequent years. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always changing. One advantage of working with a professional Central West End, MO tax planner is that they will work with you and the person who prepares your taxes to determine if there are ways to strengthen your long-term financial success.
Other services we offer in Central West End, MO include:
Tax Planning in Central West End, MO | Correct Capital Wealth Management
At Correct Capital, our Central West End, MO tax planners 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 Central West End, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial needs in Central West End, MO, call Correct Capital today at 877-930-4015 or contact us online.
