Tax Planning
Tax Planning in Crestwood, MO. Tax liability is how much you owe in taxes to local, state, and federal entities. While Uncle Sam will always collect some portion of your earnings or profits, there are perfectly legal ways you can reduce how much you owe. Tax planning is also essential for successful retirement planning. At Correct Capital, we work with Crestwood, MO individuals, families, and businesses in the Crestwood, MO area to find creative and proven strategies for reducing how much they owe. Speak to Correct Capital's financial planners and fiduciary advisors today at 877-930-4015, reach out through our website, or read on to see how diligent tax planning can keep more money in your pocket both now and in the future.
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Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
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Tax Planning for Crestwood, MO Individuals and Families
Prudent tax planning is essential for individuals and families who want to increase their retirement savings and have extra money for the short-term. Ways to reduce how much you owe when tax planning in Crestwood, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount 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 count up each deduction you're eligible for one by one. The drawback 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 may be fully or partially deductible, and the money is not taxed until you withdraw it. Money put into a Roth IRA are not deductible, but you will not be taxed on the withdrawal, as long certain requirements are met. Your unique situation 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 move 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 have 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, or up to $27,000 if you're 50 or older. For 2023, you can contribute as much as $22,500 with an extra $7,500.
If you're self-employed, you can open up an individual retirement plan, 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 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 greater 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 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 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 considerable earnings, filing separately may reduce their combined tax liability. If one spouse received substantial medical care in a given year, it may be preferable to file separately to meet the 7.5% threshold for unreimbursed medical expenses.
- Contribute to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. Accepted 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 money are used for charity
- Cemetery companies
- Any government entities, 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 qualify as a charity under U.S. law
If you start 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 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 without having to pay taxes on it. If you are 72 or older, that donation counts as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in Crestwood, MO|With the assistance of a financial planner in Crestwood, 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 Crestwood, 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 Crestwood, MO business include:
- Evaluate 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.
- Evaluate 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 changed rules for creating and maintaining retirement plans for both small and large employers, so it may be best to speak to a financial advisor in Crestwood, MO about how those changes affect your tax planning.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While an employer would have to considerable amounts of money annually, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can result in higher employment tax costs. See if your employees would be willing to accept fringe benefits as part of their compensation, instead of just rewarding them with a higher paycheck. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or paying for career-boosting courses.
You can also set up accountable plans to reimburse employees for business expenses without having to report them as employee 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. You can double how much you're allowed to put into retirement plans if 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 costs 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 if your deduction would be more than the standard mileage rate
- Look into Carryover Deductions —
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 changing. One benefit of consulting with a professional Crestwood, 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 Crestwood, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Crestwood, MO | Correct Capital Wealth Management
At Correct Capital, our Crestwood, 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 Crestwood, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial needs in Crestwood, MO, call Correct Capital today at 877-930-4015 or contact us online.
