Reduce Your Tax Liability With Correct Capital's Financial Advisors in Ellisville, MO
Tax Planning in Ellisville, MO. Tax liability is how much you owe in taxes to local, state, and federal entities. Even though taxes may be one of the two certainties in life, 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 work with Ellisville, MO individuals, families, and businesses in the Ellisville, MO area to find creative and time-tested ways to reduce how much they owe. Call Correct Capital's tax planners and fiduciary advisors today at 314-930-401(k), reach out online, or read on to learn how judicious tax planning can keep more money in your account both now and in the future.
Tax Planning for Ellisville, MO Individuals and Families
Prudent tax planning is essential for individuals and families who want to put more in their retirement accounts and afford them more money for both now and the near future. Ways to reduce your tax liability when tax planning in Ellisville, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat 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 count up each deduction you're eligible for individually. The downside is that doing your taxes takes longer, 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 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. Roth IRA contributions are not deductible, but the money grows tax free. Your age, income, and other factors will determine what may be better for you in terms of tax planning. For instance, if you anticipate being in a higher tax bracket in the future, you can convert money from a traditional IRA to a Roth IRA to pay taxes on the conversation, while allowing the money to grow tax-free.
If you have 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 up to $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 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 write off those that are higher 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 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 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 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% limit for medical deductions.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. Qualifying charities include:
- 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 companies
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the funds are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, as long as the organization would qualify as a charity under U.S. law
If you start a Donor-Advised Fund, you can deduct a bulk amount now, while still being able to wait to decide how the funds will get distributed down the road.
If you are older than 70½, you can make what's called a qualified charitable distribution by transferring a maximum of $100,000 a year from a traditional IRA directly to a charity tax-free. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you consult with an experienced financial adviser for your tax planning in Ellisville, MO|With the help a financial adviser in Ellisville, MO, they can help put more money in your pocket now while also setting you up for a financially secure retirement.
Tax Planning for Ellisville, 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 Ellisville, MO business include:
- Assess How Your Business Is Structured —
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 how much you pay in taxes both as a business and personally.
- Evaluate the Retirement Plans You Offer Employees —
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 certain retirement plans, so it's likely in your best interest to speak to a financial advisor in Ellisville, MO about how they may apply to your business.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While a business owner must significant amounts of money annually, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can lead to higher taxes for you. See if your employees would be willing to accept fringe benefits as part of their compensation, instead of just rewarding them with a raise. 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 courses that help in their career.
You can also use accountable plans to reimburse employees for business expenses without counting the reimbursement as income.
- Put Your Family to Work —
If you hire your children, they do not have to pay taxes on their first $12,000 in income, and you can help kick-start their retirement savings through an account like a ROTH IRA. You can double how much you're allowed to put into retirement plans by having 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 subtract transportation costs from your taxable profits. There are two different ways of deducting those costs:
- 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
- Document your actual expenses, like maintenance, registration fees, and gas, and figure out if your deduction would be more than the standard mileage rate
- 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 subsequent years. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. One advantage of consulting with a knowledgeable Ellisville, 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 Ellisville, 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
- Retirement Calculator
Tax Planning in Ellisville, MO | Correct Capital Wealth Management
At Correct Capital, our Ellisville, MO tax planners know how important the financial health of your family or business is, both now and in the future. That is why we hold ourselves to the fiduciary standard: we are legally and ethically bound to act in your best interest. With tax law always changing, you need a team around you that will help, like your Ellisville, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial needs in Ellisville, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.