Tax Planning
Tax Planning in Eureka, MO. Tax liability is how much taxes you pay each year to local, state, and federal entities. While Uncle Sam will always collect some portion of your earnings or profits, The IRS allows for several ways to reduce your tax liability. 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 time-tested ways to reduce their tax burden. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us online, or read on to see how judicious tax planning can benefit you.
Tax Planning for Eureka, MO Individuals and Families
Prudent tax planning can help individuals and families increase their retirement savings and afford them more money for both now and the near future. Some things to take advantage of when tax planning in Eureka, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount that reduces the amount of income you are taxed on. 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 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. Contributions to a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Money put into a Roth IRA do not affect your taxable income, 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 unique situation will determine whether a Traditional or Roth IRA is preferable in terms of tax planning. For instance, if you anticipate being in a higher tax bracket in the future, you can move 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 defer income from your paycheck and have it placed directly in your 401(k). You can contribute up to $20,500 to a 401(k) in 2022, plus an extra $6,500 if you're 50 or older. For 2023, you can contribute up to $22,500 or $30,000.
If you're have freelance income, you can open up an individual retirement plan, 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 stocks, bonds, or options, you can offset the amount of capital gains tax you would have to pay if other securities sold at a profit. This strategy is utilized more with short-term capital gains, as the tax rate is usually higher than long-term. You can deduct up to $3,000 in capital gains losses 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 are greater than 7.5% of your adjusted gross income. Paying property taxes early can also help you reduce your taxable income, and you can 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. However, if both spouses have a high income, they may be in a lower tax bracket if they file separately. If one spouse received considerable medical care in a given year, it may make sense to file separately to qualify for the 7.5% threshold for unreimbursed medical expenses.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income via charitable donations. 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," under the condition that the donations are used for charity
- Cemetery companies
- Any government entities, under the condition that the donations are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, under the condition that the organization meets the criteria for a charity under United States law
If you open 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 at least 70½ years old, you can make what's called 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 consult with an experienced financial adviser for your tax planning in Eureka, MO|With the assistance of 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 Business Owners
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 Eureka, MO business include:
- Evaluate 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 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 may be best to meet with a financial advisor in Eureka, MO about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While an employer would have to contribute several hundred thousand dollars each year, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Just offering raises can lead to higher employment tax costs. See if your employees would be willing to accept fringe benefits rather than just giving them a raise. Examples that could help reduce your tax liability are 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 reimburse employees for certain expenses like travel, meals, or entertainment without having to report them as employee 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 start saving for retirement through an account like a ROTH IRA. You can double how much you're allowed to put into retirement plans if your spouse work for the business.
- Use a Company Vehicle —
Depending on the specifics of your business, you and your employees may be able to use a company vehicle and subtract transportation expenses from your taxable income. 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 calculate if your deduction would be more than the standard mileage rate
- Look into Carryover Deductions —
You're allowed to carryover some deductions 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 adjusting old ones. A key benefit of working with an experienced Eureka, MO tax planner is that they will work with you and your tax professional to identify if there are ways to improve 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
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 act in your best interest. With tax law always changing, you need a team around you that will help, like your Eureka, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial services in Eureka, MO, call Correct Capital today at 877-930-4015 or contact us online.
