Tax Planning
Tax Planning in Clarkson Valley, MO. Tax liability refers to how much taxes you will need to pay to local, state, and federal governments. While taxes may be one of the two certainties in life, there are perfectly legal ways you can reduce how much you owe. Tax planning is also key for successful retirement planning. At Correct Capital, we work with local Clarkson Valley, MO individuals, families, and businesses to find creative and time-tested ways to reduce how much they owe. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us through our website, or read on to learn how judicious tax planning can benefit you.
Tax Planning for Clarkson Valley, MO Individuals and Families
Smart tax planning can help individuals and families increase their retirement savings and have extra money for the short-term. Ways to reduce how much you owe when tax planning in Clarkson Valley, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar 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 more income that shouldn't be taxed than the above, you can count up each deduction you're eligible for one by one. The disadvantage 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 differ in how your savings are taxed. Savings you put into a traditional IRA may be fully or partially deductible, 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 unique situation will determine whether a Traditional or Roth IRA is preferable in terms of tax planning. For instance, if you expect your taxes to go up in the future, you can transfer savings 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 as much as $22,500 or $30,000.
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 sell securities at a loss, you can use that loss to reduce your taxable capital gains. Tax-loss harvesting is more common with short-term capital gains, as the tax rate is often higher than long-term. The maximum deductible amount is $3,000 per year, but you may be able to deduct higher losses in the future.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, you can write off those that exceed 7.5% of your adjusted gross income. Paying property taxes early can also lead to deductions, 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 file jointly. It's the only way to qualify for certain tax credits and reductions. But, if both spouses earn substantial incomes, filing separately may reduce their combined tax liability. If one spouse received considerable medical treatment in a given year, it may be preferable to file separately to qualify for 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 organizations 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 government entities, under the condition that the donations are for public use
- 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 open 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 down the road.
If you are older than 70½, 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 charity without having to pay taxes on it. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you use a knowledgeable financial planner for your tax planning in Clarkson Valley, MO|With the assistance of a financial planner in Clarkson Valley, MO, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for Clarkson Valley, MO Business Owners
With diligent tax planning, business owners can keep as much of their profits as possible. 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 —
Offering retirement plans not only attracts and retains talent, but it also allows you to deduct contributions. The "SECURE" Act of 2019 offers new benefits for employers who offer certain retirement plans, so it's recommended to consult a financial advisor in Clarkson Valley, 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 a business owner must contribute several hundred thousand dollars annually, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can result in higher employment tax costs. Ask your employees if they would be willing to accept fringe 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, family or medical leave, or continuing education reimbursement.
You can also set up 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 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 —
If you and your employees need to drive as part of the normal course of your business, you can subtract transportation expenses from your taxable income. You can make the deduction in two ways:
- Use 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 half of 2022); or
- Document your actual expenses, like maintenance, registration fees, and gas, and calculate whether those allow you to deduct more than the standard mileage rate would have
- Look into 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.
Tax laws for businesses are always in flux. A key advantage of working with an experienced Clarkson Valley, MO tax planner is that they will work with you and the person who prepares your taxes to identify if there are ways to improve your personal and business 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
- Small Business Retirement Plans
- Social Security Consultants Near Me
Tax Planning in Clarkson Valley, MO | Correct Capital Wealth Management
At Correct Capital, our Clarkson Valley, MO tax planners know strong financial health is essential 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 professional, and attorney. For help with tax planning, retirement planning, or any other financial needs in Clarkson Valley, MO, call Correct Capital today at 877-930-4015 or contact us online.
