Tax Planning
Tax Planning in Fairview Heights, IL. Tax liability is how much you owe in taxes to local, state, and federal entities. While 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 to planning the retirement of your dreams. At Correct Capital, we work with local Fairview Heights, IL 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 877-930-4015, contact us online, or read on to learn how diligent tax planning can benefit you.
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Tax Planning for Fairview Heights, IL Individuals and Families
Prudent 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 how much you owe when tax planning in Fairview Heights, IL are:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked figure 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 your deductible income is more than the above, you can itemize your return. The downside is that it will take longer to complete your return, 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 differ in how they affect your taxes. Contributions to a traditional IRA may be fully or partially deductible, and you pay taxes on it when 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 unique situation will determine which type of account is preferable in terms of tax planning. For example, if you anticipate being in a higher tax bracket down the road, you can transfer savings 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 place up to $20,500 to a 401(k) in 2022, or as much as $27,000 if you're at least 50 years old. For 2023, you can contribute up to $22,500 with an extra $7,500.
If you're have freelance income, there are also retirement plans available, such as a One-Participant 401(k) Plan, and you can deduct the savings you put there from your taxable income.
- 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 typically higher than long-term. The maximum deductible amount is $3,000 per year, but you may be able to deduct higher losses down the road.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, 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 for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
More than 9 out of 10 married couples choose to file joint tax returns. 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 considerable earnings, 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 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 organizations 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," as long as the money are used for charity
- Cemetery organizations
- Any government entities, as long as the funds are meant to benefit the public
- Often, 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 charity without having to pay taxes on it. If you are 72 or older, that transfer counts as your required minimum distribution.
When you use a knowledgeable financial planner for your tax planning in Fairview Heights, IL|With the assistance of a financial planner in Fairview Heights, IL, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for Fairview Heights, IL Businesses
With diligent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Fairview Heights, IL 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 affect how much you pay in taxes both as a business and personally.
- Evaluate Your Employees' Employer-Sponsored Retirement Plans —
There are many benefits to offering employees a retirement plan, and reducing your tax liability is chief among them. The "SECURE" Act of 2019 changed rules for creating and maintaining retirement plans for both small and large employers, so it's likely in your best interest to meet with a financial advisor in Fairview Heights, IL 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 would need to significant sums of money annually, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can result in higher employment tax costs. See if your employees would be willing to accept other benefits rather than just giving them a higher paycheck. Common fringe benefits include medical insurance, group life insurance, help with childcare expenses, transportation reimbursement, meals, sick leave, or paying for courses that help in their career.
You can also set up accountable plans to reimburse employees for certain expenses like travel, meals, or entertainment without counting the reimbursement as income.
- Put Your Family On the Payroll —
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 kick-start their retirement savings through an account such as a ROTH IRA. If both you and your spouse work for the business, you can double your retirement plan contributions.
- Have a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and subtract transportation expenses from your taxable profits. There are two different ways of deducting those expenses:
- Use 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 half 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
- Look into Tax Loss Carryover —
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.
Tax laws for businesses are always changing. A key benefit of working with a knowledgeable Fairview Heights, IL tax planner is that they will work with you and the person who prepares your taxes to discover if there are ways to improve your personal and business financial success.
Other services we offer in Fairview Heights, IL include:
Tax Planning in Fairview Heights, IL | Correct Capital Wealth Management
At Correct Capital, our Fairview Heights, IL tax planners know how important the financial health of your family or business is, both now and in the future. 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 Fairview Heights, IL financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial needs in Fairview Heights, IL, call Correct Capital today at 877-930-4015 or contact us through our website.
