Tax Planning
Tax Planning in Cottleville, MO. Tax liability refers to how much you owe in taxes 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 important for successful retirement planning. At Correct Capital, we work with Cottleville, MO individuals, families, and businesses in the Cottleville, MO area to find creative and proven ways to reduce how much they owe. Call Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read the article below to discover how diligent tax planning can benefit you.
Tax Planning for Cottleville, MO Individuals and Families
Prudent tax planning can help individuals and families increase their retirement savings and have extra money for the short-term. Ways to reduce your tax liability when tax planning in Cottleville, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked figure that ensures all tax payers have at least some income that is not taxable. 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 count up each deduction you're eligible for individually. The drawback 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.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Contributions to a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Roth IRA contributions are not deductible, 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 instance, if you anticipate being in a higher tax bracket down the road, 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 with your employer, you can choose to have money deposited into your 401(k) account instead of it going to your paycheck. You can contribute 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 deposit up to $22,500 with an extra $7,500.
If you're have freelance income, you can open up an individual retirement plan, such as a One-Participant 401(k) Plan, and you can deduct the money you put there from your taxable income.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, you can use that loss to reduce your taxable capital gains. This strategy is utilized more with short-term capital gains, as the tax rate is typically 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 write off those that are higher than 7.5% of your adjusted gross income. Paying property taxes early can also help you reduce your taxable income, 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 —
The IRS says that roughly 95% of married couples file jointly. It's the only way to get certain tax credits and reductions. But, if both spouses have a high income, 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," under the condition that the funds are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the donations are meant to benefit the public
- In many cases, a Canadian, Mexican, or Israeli organization, under the condition that the organization would have been organized as a charity under U.S. 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 at least 70½ years old, you can make what's known as a qualified charitable distribution by transferring up to $100,000 a year from a traditional IRA directly to a charity tax-free. If you are 72 or older, that transfer counts as your required minimum distribution.
When you use an experienced financial planner for your tax planning in Cottleville, MO|With the assistance of a financial planner in Cottleville, MO, you can not only reduce your tax liability this year, but plan out your taxes into retirement.
Tax Planning for Cottleville, MO Businesses
Business owners can use smart tax planning to keep more money in their business. Some things to consider when tax planning for your Cottleville, MO business include:
- Review 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 how much you pay in taxes both as a business and individually.
- 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 offers new benefits for employers who offer certain retirement plans, so it may be best to speak to a financial advisor in Cottleville, 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 would need to contribute several hundred thousand dollars annually, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher employment tax costs. Talk to your employees about whether or not they would be open to other benefits rather than just giving them a raise. Examples that could help reduce your tax liability are medical insurance, group life insurance, help with childcare expenses, transportation reimbursement, meals, sick leave, or paying for career-boosting courses.
You can also use 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 —
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 kick-start their retirement savings through an account such as a ROTH IRA. If both you and your spouse work for the business, you can double your retirement plan contributions.
- Use a Company Vehicle —
Depending on the nature 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 means of deducting those costs:
- Use 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 calculate if your deduction would be more than the standard mileage rate
- Look into Tax Loss Carryover —
You're allowed to carryover some deductions 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 adjusting old ones. One advantage of working with an experienced Cottleville, MO tax planner is that they will work with you and your tax professional to identify if there are ways to strengthen your long-term financial success.
Other services we offer in Cottleville, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Cottleville, MO | Correct Capital Wealth Management
At Correct Capital, our Cottleville, 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, you need a team around you that will help, like your Cottleville, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Cottleville, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
