Reduce Your Tax Liability With Correct Capital's Financial Advisors in Crestwood, MO
Tax Planning in Crestwood, MO. Tax liability refers to how much you owe in taxes to local, state, and federal governments. While Uncle Sam will always collect some percentage of your earnings or profits, The IRS allows for several ways to reduce how much money you have to pay. Tax planning is also key for successful retirement planning. At Correct Capital, we work with local Crestwood, MO individuals, families, and businesses to find creative and time-tested strategies for reducing their tax liability. Speak to Correct Capital's financial and fiduciary advisors today at 314-930-401(k), contact us online, or read on to see how judicious tax planning can benefit you.
Tax Planning for Crestwood, MO Individuals and Families
Diligent 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 a no-questions-asked amount that you can deduct from your taxable income. In 2022 and 2023, that flat-rate is:
- $12,950 for single filers
- $25,900 for married, filing jointly
- $12,950 for married, filing separately
- $19,400 for head of household
- $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 have to prove each deduction.
- 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 the money is not taxed until you withdraw it. Savings put into a Roth IRA 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 which type of account is preferable in terms of tax planning. For example, if you expect your taxes to go up in the future, you can transfer funds from a traditional IRA to a Roth IRA to pay taxes on the transfer, 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 contribute up to $20,500 to a 401(k) in 2022, or up to $27,000 if you're at least 50 years old. For 2023, you can contribute as much as $22,500 with an extra $7,500.
If you're self-employed, there are also retirement plans available, such as 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 utilized more with short-term capital gains, as the tax rate is typically higher than long-term. The maximum deductible amount is $3,000 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. 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 file jointly. It helps spouses qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. But, if both spouses have considerable earnings, they may be in a lower tax bracket if they file separately. If one spouse has a lot of medical expenses, it may be preferable to file separately to qualify for the 7.5% threshold for unreimbursed medical expenses.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Accepted 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 U.S. federal, state, local, or Native governments and subdivisions, as long as the funds 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 save money in 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 at least 70½ years old, you can make what's called a qualified charitable distribution by transferring up to $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 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 now while also setting you up for a financially secure retirement.
Tax Planning for Crestwood, MO Businesses
With diligent tax planning, business owners can keep as much of their profits as possible. Ways to owe less in taxes when tax planning for your Crestwood, 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 how much you pay in taxes both as a business and individually.
- 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's recommended to speak to a financial advisor in Crestwood, MO about how those changes affect your tax planning.
a good idea if you and your employees are both higher-earning. While you must considerable sums of money annually, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Only offering raises can result in higher taxes for you. Ask your employees if they would be open to other benefits rather than just rewarding them with a raise. Examples that could help reduce your tax liability are medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, more paid time off, 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 —
Your kids can work for you tax-free on income up to $12,000, and you can help them start saving for retirement 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.
- Have a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and deduct the transportation costs. You can make the deduction in two ways:
- 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
- Document your actual expenses, like maintenance, registration fees, and gas, and determine if your deduction would be more than the standard mileage rate
- Consider Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over into another year. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always changing. A key advantage of consulting with a knowledgeable Crestwood, MO tax planner is that they will work with you and your tax professional to determine if there are ways to strengthen your personal and business financial success.
Other services we offer in Crestwood, MO include:
- Small Business Retirement Plans
- Social Security Consultants Near Me
- Retirement Calculator
- Retirement Planning
- Rollover 401(k)
- Wealth Management
- 401k Companies
- Financial Advisor
- Asset Management
Tax Planning in Crestwood, MO | Correct Capital Wealth Management
At Correct Capital, our Crestwood, MO financial advisors know strong financial health is key to your overall success. That's why we give our I.O.U. promise; you will only hear recommendations that are independent, objective, and unbiased. With tax law always changing, you need 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 services in Crestwood, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.