Tax Planning
Tax Planning in Des Peres, MO. Tax liability is how much taxes you pay each year to local, state, and federal governments. While Uncle Sam will always collect some portion of your earnings or profits, The IRS allows for several ways you can reduce how much you owe. Tax planning is also essential for successful retirement planning. At Correct Capital, we partner with Des Peres, MO individuals, families, and businesses in the Des Peres, MO area to find creative and proven ways to reduce how much they owe. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us online, or read the article below to see how prudent tax planning can benefit you.
Tax Planning for Des Peres, MO Individuals and Families
Diligent 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 your tax liability when tax planning in Des Peres, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar 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 more income that shouldn't be taxed than the above, you can count up each deduction you're eligible for individually. The downside is that filing will be more complicated, and you have to prove each deduction.
- Evaluate How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Savings you put into 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 are not deductible, but you will not be taxed on the withdrawal, as long certain requirements are met. 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 in the future, you can convert 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 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, or up to $27,000 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, there are also retirement plans available, 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. 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 the future.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, 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 tuition to an undergraduate, graduate and professional degree courses for your or a child, as well as courses that improve your job skills 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, in addition to a variety of tax credits not available to single filers. However, if both spouses have a high income, filing separately may reduce their combined tax liability. If one spouse received considerable medical treatment in a given year, it may make sense to file separately to qualify for the 7.5% threshold for medical deductions.
- 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 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, as long as the organization meets the criteria for a charity under United States 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 at least 70½ years of age, 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 charity without having to pay taxes on it. If you are 72 or older, that donation qualifies as your required minimum distribution.
When you use a knowledgeable financial planner for your tax planning in Des Peres, MO|With the help a financial adviser in Des Peres, 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 Des Peres, MO Business Owners
With diligent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Des Peres, MO business include:
- Evaluate How Your Business Is Structured —
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 affect both your corporate and your individual tax rate.
- Review the Retirement Plans You Offer Employees —
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 may be best to speak to a financial advisor in Des Peres, 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 have to contribute several hundred thousand dollars each year, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can lead to higher employment tax costs. See if your employees would be open to other benefits as part of their compensation, instead of just giving them more money. Examples that could help reduce your tax liability are medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or paying for career-boosting courses.
You can also use accountable plans to reimburse employees for business expenses without counting the reimbursement as income.
- Put Your Family On the Payroll —
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.
- Buy 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
- Document your actual expenses, like maintenance, registration fees, and gas, and calculate 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 subsequent years. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. One benefit of consulting with a professional Des Peres, MO tax planner is that they will work with you and your tax professional to determine if there are ways to improve your personal and business financial success.
Other services we offer in Des Peres, 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
Tax Planning in Des Peres, MO | Correct Capital Wealth Management
At Correct Capital, our Des Peres, MO financial advisors know strong financial health is key to your overall success. 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 Des Peres, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial services in Des Peres, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
