Tax Planning
Tax Planning in Clayton, MO. Tax liability refers to how much taxes you pay each year to local, state, and federal governments. 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 essential for successful retirement planning. At Correct Capital, we partner with Clayton, MO individuals, families, and businesses in the Clayton, MO area to find creative and time-tested strategies for reducing their tax burden. Call Correct Capital's financial planners and fiduciary advisors today at 314-930-4015, contact us through our website, or read the article below to see how diligent tax planning can benefit you.
Tax Planning for Clayton, MO Individuals and Families
Prudent 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 Clayton, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat figure 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 your deductible income is more than the above, you can itemize your return. 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.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Contributions to a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Roth IRA contributions do not affect your taxable income, but you will not be taxed on the withdrawal, as long as you are over 59 1/2 and have had the account for at least five years. Your unique situation will determine what may be better for you in terms of tax planning. For example, if you expect your taxes to go up in the future, you can move 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 through your job, you can choose to have earnings deposited into your 401(k) account instead of it going to your paycheck. You can place up to $20,500 to a 401(k) in 2022, or up to $27,000 if you're 50 or older. For 2023, you can contribute as much as $22,500 or $30,000.
If you're have freelance income, there are also retirement plans available, like a One-Participant 401(k) Plan, and you can deduct the funds you put there from your taxable income.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, you can offset the amount of capital gains tax you would be liable for if other securities sold at a profit. 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 future years.
- 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. 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 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 couples qualify for a higher standard deduction, in addition to a variety of tax credits not available to single filers. However, if both spouses have a high income, they may be in a lower tax bracket if they file separately. 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 via charitable donations. 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," as long as the money are used for charity
- Cemetery organizations
- Any government entities, as long as the donations are meant to benefit the public
- In many cases, a Canadian, Mexican, or Israeli organization, as long as the organization would qualify as a charity under U.S. law
If you open 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 older than 70½, you can make what's known as 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 transfer counts as your required minimum distribution.
When you consult with an experienced financial adviser for your tax planning in Clayton, MO|With the help a financial planner in Clayton, 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 Clayton, MO Business Owners
Business owners can use smart tax planning to retain more money in their business. Some things to consider when tax planning for your Clayton, MO business include:
- Assess 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 have consequences for both your corporate and your individual tax rate.
- Assess 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 offers new benefits for employers who offer 401(k)s and SIMPLE IRAs with automatic enrollment, so it may be best to meet with a financial advisor in Clayton, MO about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While an employer must considerable sums of money annually, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can result in higher employment tax costs. See if your employees would be open to fringe benefits rather than just rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or continuing education reimbursement.
You can also set up accountable plans to reimburse employees for certain expenses like travel, meals, or entertainment without counting the reimbursement as income.
- Have Your Family Work For The Business —
Your kids 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. 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 the first 6 months of 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 calculate whether those allow you to deduct more than the standard mileage rate would have
- 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. 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 consulting with a knowledgeable Clayton, 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 Clayton, 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 Clayton, MO | Correct Capital Wealth Management
At Correct Capital, our Clayton, 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 Clayton, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial services in Clayton, MO, call Correct Capital today at 314-930-4015 or contact us through our website.
