Tax Planning
Tax Planning in Fairview Heights, IL. Tax liability is how much you owe in taxes to local, state, and federal governments. Even though Uncle Sam will always collect some percentage of your earnings or profits, The IRS allows for several ways to reduce how much money you have to pay. Tax planning is also important for successful retirement planning. At Correct Capital, we partner with Fairview Heights, IL individuals, families, and businesses in the Fairview Heights, IL area to find creative and time-tested strategies for reducing their tax liability. Call Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, reach out online, or read on to learn how prudent tax planning can benefit you.
Tax Planning for Fairview Heights, IL Individuals and Families
Diligent tax planning can help individuals and families put more in their retirement accounts and have extra money for the short-term. Some things to take advantage of when tax planning in Fairview Heights, IL are:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked 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 more income that shouldn't be taxed than the above, you can itemize your return. The disadvantage is that doing your taxes takes longer, and you have to prove each deduction.
- Review 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 cannot be deducted from your taxable income, but the money grows tax free. Your unique situation will determine whether a Traditional or Roth IRA is preferable for your tax planning. For example, if you expect your taxes to go up in the future, you can move savings 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, or up to $27,000 if you're 50 or older. For 2023, you can contribute as much as $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 funds you put there from your taxable income.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, you can offset the amount of capital gains tax you would be liable for if other securities sold at a profit. This strategy is utilized more 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 write off 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 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 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 considerable earnings, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, it may be preferable 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 via charitable donations. Accepted organizations 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 funds are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the funds are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, as long as the organization would have been organized as a charity under U.S. law
If you start 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 at least 70½ years of age, you can make what's referred to as a qualified charitable distribution by transferring up to $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 adviser for your tax planning in Fairview Heights, IL|With the help a financial adviser in Fairview Heights, IL, they can help put more money in your pocket this year while also setting you up for a financially secure future.
Tax Planning for Fairview Heights, IL Business Owners
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 —
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 have consequences for both your corporate and your individual tax rate.
- Evaluate Your Employees' Employer-Sponsored Retirement Plans —
Offering retirement plans not only attracts and retains talent, but it also allows you to deduct contributions. The "SECURE" Act of 2019 offers new benefits for employers who offer certain retirement plans, so it may be best to consult a financial advisor in Fairview Heights, IL about how they may apply to your business.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While a business owner would have to contribute several hundred thousand dollars per year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can result in higher taxes for you. Talk to your employees about whether or not they would be willing to accept other benefits rather than just rewarding them with a higher paycheck. Common fringe benefits include medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, more paid time off, or continuing education reimbursement.
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.
- Have Your Family Work For The Business —
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. You can double how much you're allowed to put into retirement plans by having your spouse work for the business.
- Have a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and deduct the transportation costs. There are two different means of deducting those expenses:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for the first half 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 if your deduction would be more than the standard mileage rate
- Look into Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over 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 changing old ones. A key benefit of consulting with a professional Fairview Heights, IL 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 Fairview Heights, IL 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 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 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 Fairview Heights, IL financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial needs in Fairview Heights, IL, call Correct Capital today at 877-930-4015 or contact us online.
