Tax Planning
Tax Planning in Dardenne Prairie, MO. Tax liability is how much taxes you pay each year to local, state, and federal entities. Even though Uncle Sam will always get some percentage of your earnings or profits, 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 Dardenne Prairie, MO individuals, families, and businesses to find creative and time-tested strategies for reducing their tax burden. Speak to Correct Capital's financial planners and fiduciary advisors today at 314-930-401(k), reach out online, or read on to see how diligent tax planning can benefit you.
Tax Planning for Dardenne Prairie, MO Individuals and Families
Smart tax planning can help individuals and families put more in their retirement accounts and have extra money for the short-term. Some things to consider when tax planning in Dardenne Prairie, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount that reduces the amount of income you are taxed on. 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 drawback is that it will take longer to complete your return, 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 they affect your taxes. Contributions to a traditional IRA can be deducted from your taxable income, and the money is not taxed until you withdraw it. Roth IRA contributions cannot be deducted from your taxable income, but the money grows tax free. 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 down the road, you can move funds from a traditional IRA to a Roth IRA to pay taxes on the transfer, while allowing the money to grow tax-free.
If you contribute to a 401(k) plan through your job, 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, plus an extra $6,500 if you're at least 50 years old. For 2023, you can contribute up to $22,500 or $30,000.
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 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 future years.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can deduct 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 tuition to an undergraduate, graduate and professional degree courses for your or a child, as well as courses that improve your job skills for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS reports that roughly 95% of married couples choose to file joint tax returns. It's the only way to get certain tax credits and reductions. 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% limit for unreimbursed medical expenses.
- Donate to Charity —
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 dedicated to the prevention of cruelty to animals and children
- Veterans' organizations
- A domestic fraternal organization operating under the "lodge system," under the condition that the donations are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the funds are for public use
- Often, 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 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 called a qualified charitable distribution by transferring up to $100,000 a year from a traditional IRA directly to a non-profit organization tax-free. If you are 72 or older, that donation qualifies as your required minimum distribution.
When you use an experienced financial planner for your tax planning in Dardenne Prairie, MO|With the help a financial adviser in Dardenne Prairie, MO, you can not only pay less in taxes this year, but understand how to get further benefits once you retire.
Tax Planning for Dardenne Prairie, MO Businesses
With prudent tax planning, business owners can keep as much of their profits as possible. Ways to reduce your tax liability when tax planning for your Dardenne Prairie, 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 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 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 Dardenne Prairie, MO about how they may apply to your business.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While you would need to significant amounts of money per year, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Merely offering raises can lead to higher employment tax costs. Talk to your employees about whether or not they would be open to other 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 expenses, transportation reimbursement, meals, sick leave, or paying for courses that help in their career.
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 —
If you hire your children, 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 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 —
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:
- 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 six months of 2022); or
- Keep a record of 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.
US lawmakers are always making new tax laws for businesses, or changing old ones. One benefit of consulting with a knowledgeable Dardenne Prairie, MO tax planner is that they will work with you and your tax professional to discover if there are ways to improve your long-term financial success.
Other services we offer in Dardenne Prairie, 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 Dardenne Prairie, MO | Correct Capital Wealth Management
At Correct Capital, our Dardenne Prairie, MO tax planners 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 Dardenne Prairie, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial services in Dardenne Prairie, MO, call Correct Capital today at 314-930-401(k) or contact us online.
