Tax Planning
Tax Planning in Fontana, CA. Tax liability refers to the amount you owe in taxes to local, state, and federal authorities. While Uncle Sam will always get some portion of your earnings or profits, there are perfectly legal ways to reduce your tax liability. Tax planning is also vital to successful retirement planning. At Correct Capital, although we do not provide tax advice, we collaborate with local Fontana, CA people, families, and companies to discover creative and proven ways to lower their tax obligations. One approach we may recommend is maximizing deductible employee or employer retirement contributions to reduce tax expenses. Reach out to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, connect with us online, or keep reading to learn how proactive tax planning can benefit you.
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Tax Planning for Fontana, CA Individuals and Families
Effective tax strategies can help individuals and families increase their retirement savings and provide them with more money for both today and in the near future. Consider these elements when tax planning in Fontana, CA:
- Standard Deduction vs. Itemizing —
The standard deduction is a fixed amount that reduces your taxable income without needing specific proof of deductions. In 2024, the standard deductions are:
- $14,600 for single filers
- $29,200 for married, filing jointly
- $14,660 for married, filing separately
- $21,900 for head of household
If your deductible expenses are higher than these thresholds, itemizing—adding each eligible deduction individually—may be beneficial. The trade-off is that itemizing takes more time, as you need to provide evidence for each deduction. A financial planner in Fontana, CA can work with you to decide whether using the standard deduction or itemizing is more advantageous.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both provide tax advantages, though in different ways. With a traditional IRA, your contributions may be deductible, and you defer taxes until you take distributions. Unlike traditional IRAs, Roth IRA contributions are non-deductible, but your funds grow without future taxes. Which account benefits you most will depend on your specific tax planning needs. For example, if you anticipate higher taxes in the future, you might consider transferring money from a traditional IRA to a Roth IRA—a process known as a Roth conversion—paying taxes now but securing future tax-free growth.
If you have a 401(k) plan with your employer, it's possible to defer part of your salary directly into your 401(k) account. For 2024, you can contribute up to $23,000 to a 401(k), plus an extra $7,500 if you are over age 50.
For self-employed individuals or those with freelance income, individual retirement plans are also available. Options include a Simplified Employee Pension (SEP) IRA or a One-Participant 401(k) Plan, which allow you to deduct your contributions.
- Tax-Loss Harvesting —
Selling securities at a loss allows you to reduce the capital gains tax on profitable sales. This approach is particularly beneficial for short-term capital gains, which are often taxed at higher rates than long-term gains. The IRS allows up to $3,000 in capital loss deductions annually, and any unused losses may be applied to future tax years.
- Consider Paying Next Year's Bills Now —
Medical expenses not reimbursed by insurance can be deducted if they exceed 7.5% of your AGI. You can also make early payments for property taxes (if your local rules allow it), a child’s tuition, or professional courses, potentially benefiting from the Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
Approximately 95% of married couples choose to file jointly, which is the only way to qualify for certain tax credits and deductions. For high-income spouses, filing separately may reduce their tax bracket, depending on income differences. In situations where one spouse has substantial medical expenses, separate filing can help reach the medical deduction threshold.
- Make Charitable Donations —
Donating to eligible organizations allows you to deduct as much as 60% of your adjusted gross income. Under IRS guidelines, the following types of organizations may qualify:
- Religious, scientific, educational, or anti-cruelty non-profit organizations for animals and children
- Veterans' organizations
- Domestic fraternal organizations operating under a "lodge system" if funds go to charity
- Non-profits or companies associated with cemeteries
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as funds are for public use
- Canadian, Mexican, or Israeli organizations, provided they meet U.S. charity qualifications
*According to IRS Publication 526 (2023), Charitable Contributions
Opening a Donor-Advised Fund allows for an upfront tax deduction with the flexibility to recommend how funds are distributed over time.
Once you reach age 70½, you’re eligible to make a qualified charitable distribution by transferring up to $105,000 annually from your IRA directly to a charity without tax consequences. At age 73 and over, this donation meets the requirements for your required minimum distribution and could lessen both future required distributions and your tax bill.
Using a skilled financial adviser for tax planning in Fontana, CA not only helps lower your tax bill this year but also lays out a strategy for retirement taxes. At Correct Capital, our goal is to help you save now and position yourself for financial stability in the future.
Common Tax Planning Mistakes for Fontana, CA Individuals and Families
Effective tax planning is crucial for your family’s financial health. Yet, many people unintentionally make errors that could result in higher tax liabilities or missed savings opportunities. Here’s a look at some typical tax planning missteps and how Correct Capital helps you avoid them:
- Not Maximizing Retirement Contributions —
Failing to contribute the maximum allowable amounts to tax-advantaged retirement accounts, such as Traditional IRAs, Roth IRAs, or 401(k) plans, can lead to missed tax deductions and reduced growth potential over time.
How Correct Capital Helps: We review your financial situation to help you make the most of allowable contributions, lowering your taxes while securing a robust retirement future.
- Overlooking Available Tax Credits and Deductions —
Many miss out on significant credits and deductions, such as the Earned Income Tax Credit, Child Tax Credit, or deductions for healthcare and education expenses.
How Correct Capital Helps: Our team checks your tax return for any missed credits and deductions, with the goal of increasing your refund or decreasing your tax bill.
- Poor Record-Keeping —
Disorganized financial records can lead to missed deductions and complications when filing taxes. Without accurate documentation, you might struggle to substantiate claims if audited.
How Correct Capital Helps: Our team helps you establish organized record-keeping systems and locate required documents, making sure everything is available for tax filing or in case of an audit.
- Ignoring Tax-Efficient Investment Strategies —
Neglecting tax-efficient investment strategies, such as asset location or tax-loss harvesting, can erode overall returns.
How Correct Capital Helps: We help you implement tax-efficient investment strategies, including selecting the best vehicles and methods to lower taxes on dividends, interest, and gains.
- Failing to Plan for Life Changes —
Significant life changes, such as marriage, divorce, becoming a parent, or purchasing a home, can greatly affect your tax obligations. Ignoring these life events may cause surprise tax liabilities.
How Correct Capital Helps: Our team works with you to adapt your tax planning to significant life events, so you maximize applicable credits and deductions and meet tax requirements.
- Underestimating Estimated Tax Payments —
If you earn income not subject to withholding, such as freelance or investment income, estimated tax payments may be necessary. Failure to do so can lead to penalties and interest.
How Correct Capital Helps: We work with you to build cash reserves to cover estimated tax payments, helping you avoid penalties and interest fees.
- Not Utilizing Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) —
Contributing to HSAs and FSAs offers tax savings for medical expenses, yet many people overlook these options.
How Correct Capital Helps: We offer guidance on the benefits of HSAs and FSAs, assessing whether they suit your circumstances and helping you allocate pre-tax dollars for healthcare expenses to lower taxable income.
- Overlooking Education Savings Plans —
Ignoring options like 529 college savings plans can lead to missed tax benefits when saving for a child’s education.
How Correct Capital Helps: Our team assists you in establishing education savings plans that feature tax-deferred growth and potential state tax deductions.
- Not Reviewing Withholding Allowances —
Having too much or too little tax withheld from your paycheck can lead to either a large refund or an unexpected tax bill.
How Correct Capital Helps: Our team helps you adjust your W-4 form to achieve accurate withholding, enhancing cash flow and preventing unexpected tax bills.
- Missing Opportunities for Charitable Contributions —
Failing to document or strategize charitable donations can mean lost deductions.
How Correct Capital Helps: Our advisors help you strategize charitable contributions to maximize deductions, including guidance on Qualified Charitable Distributions if eligible.
Tax Planning for Fontana, CA Business Owners
Business owners in Fontana, CA can utilize tax planning strategies to maximize retained earnings in their business. Consider these points when tax planning for your Fontana, CA business:
- Review the Structure of Your Business —
The structure of your business impacts tax planning and should be carefully considered. Forming your business as an LLC, sole proprietorship, partnership, or S or C corporation will influence both the corporate and personal tax rates.
- Review the Retirement Plans You Offer Employees —
Offering retirement benefits like 401(k)s, 403(b)s, or other defined contribution plans can lower your tax burden. With changes under the "SECURE" Act of 2019, speaking to a financial advisor in Fontana, CA about retirement plan tax benefits is recommended.
For high-income business owners with well-paid employees, consider a Cash Balance Pension Plan. While this may involve substantial contributions, the tax savings can be considerable.
- Have Your Family Work For The Business —
Hiring family members can bring tax benefits. Children can work for you tax-free up to $14,600, and they can start saving in a ROTH IRA. Having your spouse on the payroll can let you double the amount you contribute to retirement.
- Use a Company Vehicle —
Based on your Fontana, CA business type, you and your employees may qualify to use a company vehicle with deductible transportation costs. This deduction can be made in two ways:
- Take the standard mileage deduction of 67 cents per mile for gas and electric vehicles; or
- Track your actual expenses, such as maintenance, registration fees, and fuel, to determine if this amount exceeds the standard mileage rate deduction.
- Consider Fringe Benefits For Your Employees —
Increasing wages for employees can drive up employment tax expenses. Consider whether employees would prefer fringe benefits instead of direct wage increases. Possible fringe benefits that may reduce tax liabilities are health insurance, group life insurance, childcare assistance, transport reimbursements, meals, family or medical leave, and continuing education reimbursement.
You can implement accountable plans to cover certain employee expenses, such as travel, meals, or entertainment, without reporting them as income.
- Look into Carryover Deductions —
If certain deductions aren’t usable this year, you may be able to apply them in a different tax year. Potential carryover deductions are home office deductions, net operating losses, business credits, and capital losses.
Tax regulations for businesses are always in flux. One advantage of working with a professional Fontana, CA tax planner is that they will collaborate with you and your tax professional to find ways to improve long-term financial success.
Common Tax Planning Mistakes for Fontana, CA Businesses
Effective tax planning allows businesses of all sizes to reduce tax liabilities and increase profitability. However, many businesses fall into common tax mistakes that may lead to higher taxes, missed deductions, or even penalties. Below are some of the most common tax planning errors businesses make and how Correct Capital can help you avoid them.
- Not Paying Estimated Quarterly Taxes —
Businesses may overlook or underpay quarterly estimated taxes, which can lead to penalties and interest from the IRS. This is especially common among small businesses, freelancers, or companies with variable income.
How Correct Capital Helps: We provide support in calculating and scheduling estimated taxes so you meet IRS requirements and avoid penalties.
- Neglecting Retirement Plan Contributions for Owners and Employees —
Retirement plan contributions are often underused by businesses to reduce taxable income. Options such as 401(k)s, SEP IRAs, and Solo 401(k)s deliver notable tax benefits for both owners and staff.
How Correct Capital Helps: Our team helps set up and optimize retirement plans that lower taxes and serve as a tool for recruiting and retaining employees.
- Not Planning for Profitability and Cash Flow —
Focusing solely on cutting current taxes often leads businesses to miss out on planning for sustained growth and profitability. This short-term focus can result in missed chances for strategic investments or tax-efficient growth strategies.
How Correct Capital Helps: Our team provides tax planning that goes beyond short-term cuts, supporting businesses in planning for growth, reinvesting, and handling cash flow efficiently.
- Neglecting Exit and Estate Planning —
A succession plan addressing the financial aspects of selling a business is often overlooked by owners. Often focused on day-to-day business, owners can overlook how to handle proceeds from a sale to minimize taxes. Without proper estate planning, owners might not fully address their loved ones’ and beneficiaries’ financial security.
How Correct Capital Helps: Our team supports business owners in exit planning, helping them decide how to manage the proceeds from a sale. Our approach involves identifying the purpose of the funds and applying estate planning strategies, which consider beneficiaries and minimize taxes.
Tax Planning in Fontana, CA | Correct Capital Wealth Management
Correct Capital’s financial advisors and tax planners in Fontana, CA recognize the importance of financial well-being for your family or business, today and into the future. For this reason, we follow the fiduciary standard and our I.O.U. promise, meaning that every recommendation we provide is independent, objective, and unbiased. As tax regulations evolve, it’s important to work with a team that includes your Fontana, CA financial advisor, tax specialist, and attorney. If you need help with tax planning, retirement strategies, or other financial services in Fontana, CA, call Correct Capital today at 877-930-4015 or get in touch online.
