Tax Planning
Tax Planning in Dardenne Prairie, MO. Tax liability is how much taxes you pay each year to local, state, and federal governments. Even though Uncle Sam will always get some portion of your earnings or profits, The IRS allows for several ways to reduce your tax liability. Tax planning is also important to planning the retirement of your dreams. 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 tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read on to see how diligent tax planning can benefit you.
Tax Planning for Dardenne Prairie, MO Individuals and Families
Prudent tax planning is essential for individuals and families who want to increase their retirement savings and afford them more money for both now and the near future. Ways to reduce how much you owe when tax planning in Dardenne Prairie, 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, 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 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 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.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Contributions to a traditional IRA can be deducted from your taxable income, and you pay taxes on it when you withdraw it. Savings put into a Roth IRA 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 have more tax liability in the future, you can transfer money 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 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 as much as $27,000 if you're 50 or older. For 2023, you can deposit as much as $22,500 or $30,000.
If you're self-employed, you can open up an individual retirement plan, like 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 utilized more with short-term capital gains, as the tax rate is usually higher than long-term. The maximum deductible amount is $3,000 per year, but you may be able to deduct higher losses in the future.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can write off those that exceed 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 —
The IRS says that roughly 95% of married couples choose to file joint tax returns. It's the only way to get certain tax credits and reductions. But, if both spouses have substantial earnings, they may be in a lower tax bracket if they file separately. If one spouse received considerable medical treatment in a given year, it may make sense to file separately to meet the 7.5% threshold for medical deductions.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying organizations include:
- 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 funds are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the donations are meant to benefit the public
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. law
If you deposit money in a Donor-Advised Fund, you can contribute a bulk 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 referred to as a qualified charitable distribution by transferring up to $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 Dardenne Prairie, MO|With the assistance of a financial adviser in Dardenne Prairie, MO, you can not only reduce your tax liability this year, but understand how to get further benefits once you retire.
Tax Planning for Dardenne Prairie, MO Businesses
Business owners can use smart tax planning to retain more money in their business. Ways to owe less in taxes when tax planning for your Dardenne Prairie, 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 —
There are many benefits to offering employees a retirement plan, and reducing your tax liability is chief among them. The "SECURE" Act of 2019 changed rules for creating and maintaining retirement plans for both small and large employers, so it's recommended to consult a financial advisor in Dardenne Prairie, 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 an employer would have to significant sums of money each year, the tax saving can be significant.
- Consider Fringe 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 rather than just rewarding them with a raise. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or paying for career-boosting courses.
You can also use accountable plans to pay employees back for business expenses 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 your spouse works in 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:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for the first half 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 another year. These can include 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. A key advantage of consulting with an experienced 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 personal and business 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
Tax Planning in Dardenne Prairie, MO | Correct Capital Wealth Management
At Correct Capital, our Dardenne Prairie, 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 Dardenne Prairie, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial needs in Dardenne Prairie, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
