Reduce Your Tax Liability With Correct Capital's Financial Advisors in Frontenac, MO
Tax Planning in Frontenac, MO. Tax liability is how much you owe in taxes to local, state, and federal authorities. Even though 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 work with Frontenac, MO individuals, families, and businesses in the Frontenac, MO area to find creative and time-tested strategies for reducing how much they owe. Speak to Correct Capital's financial planners and fiduciary advisors today at 314-930-401(k), contact us through our website, or read on to learn how diligent tax planning can benefit you.
Tax Planning for Frontenac, MO Individuals and Families
Diligent tax planning can help individuals and families 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 Frontenac, MO include:
- 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:
- $12,950 for single filers
- $25,900 for married, filing jointly
- $12,950 for married, filing separately
- $19,400 for head of household
- $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 filing will be more complicated, and you will have to document why you are eligible for the deduction when you send your returns.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Contributions to a traditional IRA can be deducted from your taxable income, and you pay taxes on it when you withdraw it. Roth IRA contributions do not affect your taxable income, but the money grows tax free. Your unique situation will determine which type of account is preferable in terms of tax planning. For example, if you anticipate have more tax liability down the road, you can transfer savings from a traditional IRA to a Roth IRA to pay taxes on the transfer, and enjoy tax-free withdrawals when you need the money in retirement.
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 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 up to $22,500 with an extra $7,500.
If you're self-employed, there are also retirement plans available, such as a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you sell securities at a loss, you can use that loss to reduce your taxable capital gains. Tax-loss harvesting is utilized more with short-term capital gains, as the tax rate is often 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. 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 in order to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS says that roughly 95% of 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 are higher-earning individuals, 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 be preferable to file separately to meet the 7.5% threshold for medical deductions.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Accepted charities are:
- 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 donations are used for charity
- Cemetery companies
- Any government entities, under the condition that the funds are for public use
- Often, 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 contribute a large 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 old, you can make what's known as a qualified charitable distribution by transferring up to $100,000 a year from a traditional IRA directly to a non-profit organization tax-free. If you are 72 or older, that donation qualifies as your required minimum distribution.
When you use an experienced financial planner for your tax planning in Frontenac, MO|With the assistance of a financial adviser in Frontenac, MO, they can help put more money in your pocket now while also setting you up for a financially secure future.
Tax Planning for Frontenac, MO Businesses
With diligent tax planning, business owners can keep as much of their profits as possible. Ways to reduce your tax liability when tax planning for your Frontenac, MO business include:
- Evaluate the Structure of Your Business —
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.
- Review 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 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 Frontenac, MO about how those changes affect your tax planning.
a good idea if you and your employees are both higher-earning. While a business owner would have to significant sums of money annually, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher taxes for you. See if your employees would be open to fringe benefits as part of their compensation, instead of just rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, sick leave, or paying for courses that help in their career.
You can also use accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without counting the reimbursement as 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 them begin to save in a vehicle like a ROTH IRA. If your spouse works in 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 deduct the transportation costs. There are two different ways of deducting those costs:
- 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 six months of 2022); or
- Keep a record of 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
- Consider Tax Loss Carryforward —
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. One benefit of consulting with an experienced Frontenac, MO tax planner is that they will work with you and your tax professional to discover if there are ways to strengthen your long-term financial success.
Other services we offer in Frontenac, MO include:
- 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
- Retirement Calculator
- Retirement Planning
Tax Planning in Frontenac, MO | Correct Capital Wealth Management
At Correct Capital, our Frontenac, MO financial advisors know strong financial health is key to your overall success. 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, you need a team around you that will help, like your Frontenac, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial needs in Frontenac, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.