Tax Planning
Tax Planning in Eureka, MO. Tax liability is how much taxes you pay each year to local, state, and federal governments. While taxes may be one of the two certainties in life, 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 Eureka, MO individuals, families, and businesses to find creative and proven ways to reduce their tax burden. Speak to Correct Capital's tax planners and fiduciary advisors today at 314-930-401(k), contact us online, or read on to learn how judicious tax planning can keep more money in your pocket both now and down the road.
Tax Planning for Eureka, MO Individuals and Families
Diligent 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 Eureka, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat figure that ensures all tax payers have at least some income that won't be taxed. 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 fill out your return, and you have to prove each deduction.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Contributions to a traditional IRA can be deducted from your taxable income, and you pay taxes on it when you withdraw it. Roth IRA contributions are not deductible, but you will not be taxed on the withdrawal, as long as you are over 59 1/2 and have had the account for at least five years. Your age, income, and other factors will determine which type of account is preferable for your tax planning. For instance, if you expect your taxes to go up down the road, 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 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 at least 50 years old. For 2023, you can contribute as much as $22,500 or $30,000.
If you're have freelance income, there are also retirement plans available, such as a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, you can offset the amount of capital gains tax you would have to pay if other securities sold at a profit. Tax-loss harvesting is more common 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 additional losses can be carried over into future years.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, you can deduct 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 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 earn considerable incomes, they may be in a lower tax bracket if they file separately. If one spouse received substantial medical treatment in a given year, it may make sense to file separately to qualify for the 7.5% limit for unreimbursed medical expenses.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying organizations 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," as long as the money are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the donations are for public use
- 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 open 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 over 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 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 a knowledgeable financial planner for your tax planning in Eureka, MO|With the help a financial planner in Eureka, MO, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for Eureka, MO Businesses
With prudent tax planning, business owners can keep as much of their profits as possible. Ways to owe less in taxes when tax planning for your Eureka, MO business include:
- Evaluate 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.
- Evaluate 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 changed rules for creating and maintaining retirement plans for both small and large employers, so it may be best to consult a financial advisor in Eureka, MO about how those changes affect your tax planning.
a good idea if you and your employees are both higher-earning. While an employer would have to considerable sums of money each year, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can result in higher employment tax costs. See if your employees would be open to other benefits rather than just rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or continuing education reimbursement.
You can also set up accountable plans to pay employees back for business expenses without having to report them as employee income.
- Put Your Family to Work —
If you get your children on the payroll, 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. 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 costs:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for the first 6 months 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
- 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.
Tax laws for businesses are always changing. One advantage of consulting with an experienced Eureka, MO tax planner is that they will work with you and the person who prepares your taxes to determine if there are ways to strengthen your personal and business financial success.
Other services we offer in Eureka, 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 Eureka, MO | Correct Capital Wealth Management
At Correct Capital, our Eureka, MO financial advisors 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, it's important to put a team around you that will help, like your Eureka, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Eureka, MO, call Correct Capital today at 314-930-401(k) or contact us online.
