Tax Planning
Tax Planning in Fenton, MO. Tax liability refers to how much taxes you will need to pay to local, state, and federal entities. 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 partner with Fenton, MO individuals, families, and businesses in the Fenton, MO area to find creative and proven strategies for reducing how much they owe. Speak to Correct Capital's tax planners and fiduciary advisors today at 314-930-401(k), reach out online, or read on to learn how prudent tax planning can keep more money in your account both now and down the road.
Tax Planning for Fenton, 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 Fenton, 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, 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 disadvantage 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. Savings you put into a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Savings 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 what may be better for you in terms of tax planning. For example, if you expect your taxes to go up down the road, you can move 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 through your job, you can choose to have earnings 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 up to $27,000 if you're at least 50 years old. For 2023, you can deposit as much as $22,500 with an extra $7,500.
If you're have freelance income, you can open up an individual retirement plan, like 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 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 often 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 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 file jointly. It helps couples qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. But, if both spouses have substantial earnings, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, it may make sense to file separately to qualify for 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. 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," under the condition that the money are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as 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 get a tax reduction by putting money into it now, while still being able to wait to decide how the funds will get distributed in the future.
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 counts as your required minimum distribution.
When you consult with an experienced financial planner for your tax planning in Fenton, MO|With the assistance of a financial adviser in Fenton, MO, they can help put more money in your pocket now while also setting you up for a financially secure retirement.
Tax Planning for Fenton, MO 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 Fenton, MO 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 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 recommended to speak to a financial advisor in Fenton, MO about how those changes affect your tax planning.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While an employer would have to considerable sums of money per year, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Just offering raises can result in higher employment tax costs. Talk to your employees about whether or not they would be willing to accept other benefits as part of their compensation, instead of just rewarding them with a raise. Common fringe benefits include medical insurance, group life insurance, help with childcare expenses, transportation reimbursement, meals, family or medical leave, or paying for courses that help in their career.
You can also set up accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without having to report them as employee income.
- Have Your Family Work For The Business —
Your kids can work for you tax-free on income up to $12,000, and you can help kick-start their retirement savings through an account like a ROTH IRA. If both you and your spouse work for the business, you can double your retirement plan contributions.
- 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. You can make the deduction in two ways:
- 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 determine if your deduction would be more than the standard mileage rate
- Look into 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.
Congress are always making new tax laws for businesses, or adjusting old ones. A key benefit of consulting with a knowledgeable Fenton, MO tax planner is that they will work with you and your tax professional to determine if there are ways to improve your personal and business financial success.
Other services we offer in Fenton, 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 Fenton, MO | Correct Capital Wealth Management
At Correct Capital, our Fenton, MO 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; you will only hear recommendations that are independent, objective, and unbiased. With tax law always changing, it's important to put a team around you that will help, like your Fenton, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial services in Fenton, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.
