Tax Planning
Tax Planning in Ellisville, MO. Tax liability refers to how much you owe in taxes to local, state, and federal entities. While taxes may be one of the two certainties in life, there are perfectly legal ways to reduce your tax liability. Tax planning is also important for successful retirement planning. At Correct Capital, we work with local Ellisville, MO individuals, families, and businesses to find creative and proven strategies for reducing their tax burden. Call Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read on to learn how prudent tax planning can benefit you.
Tax Planning for Ellisville, 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. Some things to consider when tax planning in Ellisville, 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:
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 itemize your return. The drawback is that doing your taxes takes longer, 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. Money you put into a traditional IRA can be deducted from your taxable income, and you pay taxes on it when you withdraw it. Money 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 example, if you expect your taxes to go up down the road, you can move 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 contribute to a 401(k) plan through your work, 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 as much as $27,000 if you're 50 or older. For 2023, you can contribute up to $22,500 or $30,000.
If you're self-employed, 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 securities at a loss, you can offset the amount of capital gains tax you would be liable for if other securities sold at a profit. Tax-loss harvesting is more common 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 unreimbursed medical expenses, you can deduct those that exceed 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 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 file jointly. It helps couples qualify for a higher standard deduction, in addition to a variety of tax credits not available to single filers. But, if both spouses have a high income, filing separately may reduce their combined tax liability. 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.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying charities 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 donations are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the donations are for public use
- 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 deposit 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 in the future.
If you are over 70½, you can make what's referred to as a qualified charitable distribution by transferring no more than $100,000 a year from a traditional IRA directly to a charity tax-free. 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 Ellisville, MO|With the help a financial planner in Ellisville, 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 Ellisville, MO Businesses
Business owners can use effective tax planning to keep more money in their business. Some things to consider when tax planning for your Ellisville, 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 affect both your corporate and your individual tax rate.
- Assess 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 offers new benefits for employers who offer 401(k)s and SIMPLE IRAs with automatic enrollment, so it's likely in your best interest to meet with a financial advisor in Ellisville, 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 must considerable sums of money each year, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Only offering raises can result in 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 rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, help with childcare expenses, transportation reimbursement, meals, sick leave, or continuing education reimbursement.
You can also use accountable plans to reimburse employees for business expenses without counting the reimbursement as income.
- Put Your Family to Work —
Children 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. You can double your retirement plan contributions if your spouse work for the business.
- Use a Company Vehicle —
If you and your employees need to drive as part of the normal course of your business, you can subtract transportation costs from your taxable profits. There are two different ways of deducting those expenses:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for January to June in 2022) or 62.5 cents per mile (for July to December in 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
- Consider Tax Loss Carryover —
You're allowed to carryover some deductions into subsequent years. 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 adjusting old ones. A key advantage of working with a knowledgeable Ellisville, MO tax planner is that they will work with you and your tax professional to determine if there are ways to strengthen your long-term financial success.
Other services we offer in Ellisville, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Ellisville, MO | Correct Capital Wealth Management
At Correct Capital, our Ellisville, MO tax planners know strong financial health is key to your overall success. That is why we hold ourselves to the fiduciary standard: we are legally and ethically bound to do what's best for you and only you. With tax law always changing, you need a team around you that will help, like your Ellisville, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial needs in Ellisville, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
