Tax Planning
Tax Planning in Clarkson Valley, MO. Tax liability is how much you owe in taxes to local, state, and federal authorities. Even though taxes may be one of the two certainties in life, The IRS allows for several ways you can reduce how much you owe. Tax planning is also important to planning the retirement of your dreams. At Correct Capital, we work with local Clarkson Valley, MO individuals, families, and businesses to find creative and proven strategies for reducing 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 discover how diligent tax planning can benefit you.
Tax Planning for Clarkson Valley, MO Individuals and Families
Prudent 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 how much you owe when tax planning in Clarkson Valley, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount that you can deduct from your taxable income. 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 individually. The downside is that doing your taxes takes longer, and you have to prove each deduction.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Contributions to a traditional IRA can be deducted from your taxable income, and the money is not taxed until you withdraw it. Savings put into a Roth IRA are not deductible, but the money grows tax free. Your unique situation will determine which type of account is preferable in terms of 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 conversation, and enjoy tax-free withdrawals when you need the money in retirement.
If you have a 401(k) plan with your employer, 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 at least 50 years old. For 2023, you can deposit as much as $22,500 with an extra $7,500.
If you're self-employed, you can open up an individual retirement plan, like a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, you can offset the amount of capital gains tax you would have to pay if other securities sold at a profit. This strategy is more common with short-term capital gains, as the tax rate is often higher than long-term. You can deduct up to $3,000 in capital gains losses per year, but additional losses can be carried over into future years.
- 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. You can also make deductions this year for property taxes if you pay early (and if your municipality allows it), pay for a kid'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 helps spouses qualify for a higher standard deduction, in addition to a variety of tax credits not available to single filers. But, if both spouses have a high income, they may be in a lower tax bracket if they file separately. If one spouse received considerable medical care in a given year, it may make sense to file separately to meet the 7.5% limit for medical deductions.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying 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," under the condition that the funds are used for charity
- Cemetery organizations
- Any government entities, as long as the funds are for public use
- Often, a Canadian, Mexican, or Israeli organization, as long as the organization would qualify as a charity under U.S. law
If you save 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 in the future.
If you are at least 70½ years of age, 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 donation qualifies as your required minimum distribution.
When you use an experienced financial adviser for your tax planning in Clarkson Valley, MO|With the assistance of a financial planner in Clarkson Valley, MO, they can help put more money in your pocket this year while also setting you up for a financially secure future.
Tax Planning for Clarkson Valley, MO Businesses
Business owners can use smart tax planning to keep more money in their business. Ways to reduce your tax liability when tax planning for your Clarkson Valley, MO business include:
- Assess 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 have consequences for both your corporate and your individual tax rate.
- Review the Retirement Plans You Offer Employees —
There are many benefits to offering employees a retirement plan, and reducing your tax liability is chief among them. 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 meet with a financial advisor in Clarkson Valley, MO about how they may apply to your business.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While a business owner must considerable sums of money per year, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher employment tax costs. See if your employees would be willing to accept other benefits rather than just giving them a higher paycheck. Examples that could help reduce your tax liability are 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 business expenses without having to report them as employee income.
- Have Your Family Work For The Business —
If you hire your children, they do not have to pay taxes on their first $12,000 in income, and you can help kick-start their retirement savings through an account such as a ROTH IRA. You can double your retirement plan contributions by having your spouse work for the business.
- Have 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 expenses 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 January to June in 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
- 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. One benefit of consulting with a professional Clarkson Valley, 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 Clarkson Valley, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
- 401(k) For Small Business
Tax Planning in Clarkson Valley, MO | Correct Capital Wealth Management
At Correct Capital, our Clarkson Valley, MO tax planners know strong financial health is key 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 Clarkson Valley, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial services in Clarkson Valley, MO, call Correct Capital today at 877-930-4015 or contact us online.
