Tax Planning
Tax Planning in Garland, TX. Tax liability refers to the amount you owe in taxes to local, state, and federal authorities. Although paying taxes is unavoidable, various lawful strategies can minimize how much you owe. Tax planning is also vital to successful retirement planning. At Correct Capital, we don’t offer tax advice, but we work alongside local Garland, TX individuals, families, and businesses to find inventive and reliable ways to decrease 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, get in touch online, or continue reading to understand the benefits of prudent tax planning.
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Tax Planning for Garland, TX Individuals and Families
Proactive tax planning can help individuals and families increase their retirement savings and give them more money for both the present and the future. Here are some key points when tax planning in Garland, TX:
- Standard Deduction vs. Itemizing —
The standard deduction is a fixed amount that allows a straightforward deduction from your taxable income. 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 exceed these amounts, you may benefit from itemizing your deductions, where you list each eligible deduction separately. The trade-off is that itemizing takes more time, as you need to provide evidence for each deduction. A financial planner in Garland, TX can assist in determining whether taking the standard deduction or itemizing is more beneficial.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits, but in distinct ways. Contributions to a traditional IRA may be fully or partially deductible, and taxes are only applied upon withdrawal. Unlike traditional IRAs, Roth IRA contributions are non-deductible, but your funds grow without future taxes. The ideal choice depends on your personal financial and tax situation. 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, you can set aside income from your paycheck, placing it straight into your 401(k). For 2024, you can contribute up to $23,000 to a 401(k), plus an extra $7,500 if you are over age 50.
If you're self-employed or have freelance income, you may also establish a retirement plan that suits your situation. Options include a Simplified Employee Pension (SEP) IRA or a One-Participant 401(k) Plan, enabling you to deduct your contributions.
- Tax-Loss Harvesting —
If you sell securities at a loss, you can offset the amount of capital gains tax owed on profits from other securities. Tax-loss harvesting is especially useful for short-term gains, where tax rates are higher than for long-term gains. Each year, up to $3,000 in capital losses can be deducted, and extra losses can be carried forward to future years.
- Consider Paying Next Year's Bills Now —
For unreimbursed medical expenses, you can deduct costs that surpass 7.5% of your adjusted gross income. Other potential deductions include prepaying property taxes if permitted, covering future tuition costs, or investing in career-advancing courses to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
Roughly 95% of married individuals file jointly, as this is required for some tax benefits and credits. For high-income spouses, filing separately may reduce their tax bracket, depending on income differences. Separate filing may also make sense if one partner has considerable medical costs, making it easier to meet the 7.5% medical deduction limit.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income by making donations to certain organizations. According to IRS Publication 526, qualifying organizations include:
- Non-profits that are religious, scientific, educational, or focused on preventing cruelty to animals or children
- Non-profits supporting veterans
- 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
If you start a Donor-Advised Fund, you’re able to contribute a significant amount right away for an instant tax deduction and suggest distributions over the coming years.
At age 70½ or older, you can make a qualified charitable distribution by transferring up to $105,000 each year tax-free from a traditional IRA directly to a charity. If you are 73 or older, that donation also counts toward your required minimum distribution, which may reduce both your future required distributions and tax burden.
By working with an experienced financial adviser for tax planning in Garland, TX, you can reduce your tax liability this year and create a plan for managing taxes through retirement. 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 Garland, TX Individuals and Families
Effective tax planning is crucial for your family’s financial health. However, mistakes in tax planning can lead to paying more in taxes than necessary or missing out on potential savings. Here’s a look at some typical tax planning missteps and how Correct Capital helps you avoid them:
- Not Maximizing Retirement Contributions —
By not maximizing contributions to retirement accounts like Traditional IRAs, Roth IRAs, or 401(k)s, you risk losing out on tax deductions and long-term growth opportunities.
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 —
Valuable tax credits and deductions—like the Earned Income Tax Credit, Child Tax Credit, and deductions for medical and educational expenses—are often overlooked by individuals.
How Correct Capital Helps: We carefully examine your tax return to verify if you’ve taken advantage of all possible credits and deductions, helping to maximize refunds or reduce liabilities.
- Poor Record-Keeping —
A lack of organized financial records may result in missed deductions and complications at tax filing time, and without the right documents, you may have trouble supporting claims if audited.
How Correct Capital Helps: We work with you to create efficient record-keeping practices and gather needed documentation, so all records are accessible when tax season arrives or if an audit occurs.
- Ignoring Tax-Efficient Investment Strategies —
When investment decisions are made without considering tax consequences, returns may be reduced. This often happens when asset location strategies are ignored or tax losses are not harvested.
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 —
Life events, including marriage, divorce, welcoming a child, or buying a property, often alter your tax landscape considerably. Overlooking these changes could result in unforeseen tax bills.
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 —
For income not subject to withholding—like freelance or investment earnings—you may be required to make estimated tax payments. Failure to do so can lead to penalties and interest.
How Correct Capital Helps: We help you prepare your cash flow to cover estimated tax payments, avoiding fines and added interest.
- Not Utilizing Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) —
HSAs and FSAs provide tax advantages for covering medical costs, but many eligible individuals miss out by not contributing.
How Correct Capital Helps: Our advisors explain the advantages of HSAs and FSAs and determine if they’re right for you, helping you set aside pre-tax funds for medical costs to reduce taxes.
- Overlooking Education Savings Plans —
By not using options like 529 plans, you could miss out on tax benefits that aid in saving for a child’s education.
How Correct Capital Helps: We help you open education savings accounts, allowing for tax-deferred growth and possible state tax benefits.
- Not Reviewing Withholding Allowances —
Incorrect tax withholding—either too much or too little—may result in a big 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 Garland, TX Business Owners
Business owners in Garland, TX can use strategic tax planning to keep more revenue within their business. Consider these points when tax planning for your Garland, TX business:
- Review the Structure of Your Business —
Your business structure plays a significant role in tax planning and should be carefully evaluated. 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 Garland, TX about retirement plan tax benefits is recommended.
For business owners and employees with higher incomes, a Cash Balance Pension Plan can offer significant tax savings, even if it requires a sizable investment.
- 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 —
Depending on your business activities in Garland, TX, both you and your employees could use a company vehicle and deduct the associated costs. There are two options for claiming this deduction:
- Take the standard mileage deduction of 67 cents per mile for gas and electric vehicles; or
- Keep a record of actual expenses, including maintenance, registration, and gas, to see if this results in a larger deduction than the standard mileage rate.
- Consider Fringe Benefits For Your Employees —
Increasing wages for employees can drive up employment tax expenses. Explore the possibility of offering fringe benefits instead of wage raises. Examples that could help reduce your tax liability include medical insurance, group life insurance, childcare support, transportation reimbursements, meal programs, family or medical leave, and reimbursement for continued education.
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 can’t be claimed this year, it may be possible to carry them forward into a future tax year. These may include deductions such as home office expenses, net operating losses, business credits, and capital losses.
Business tax laws change frequently. One advantage of working with a professional Garland, TX 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 Garland, TX Businesses
Effective tax planning allows businesses of all sizes to reduce tax liabilities and increase profitability. Unfortunately, common tax mistakes can cause businesses to pay more, miss deductions, and risk 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 —
Some businesses miss or underpay estimated quarterly taxes, which often leads to IRS penalties and added interest. Small businesses, freelancers, and companies with fluctuating income are particularly susceptible to this.
How Correct Capital Helps: Our team assists in calculating and timing estimated tax payments to keep businesses compliant with IRS rules and avoid penalties.
- Neglecting Retirement Plan Contributions for Owners and Employees —
Many companies miss the opportunity to use retirement contributions to lower their taxable income. Plans like 401(k)s, SEP IRAs, and Solo 401(k)s can provide substantial tax benefits for both owners and employees.
How Correct Capital Helps: We assist businesses in establishing retirement plans that cut taxes and appeal to prospective and current employees.
- Not Planning for Profitability and Cash Flow —
Some businesses only focus on minimizing their current tax bill, neglecting long-term growth and profitability. This approach can prevent businesses from taking advantage of strategic investment or growth opportunities.
How Correct Capital Helps: We offer comprehensive tax planning that extends beyond immediate deductions, helping businesses plan for growth, reinvest profits, and manage cash flow effectively.
- Neglecting Exit and Estate Planning —
Many business owners don’t establish a succession plan to handle the financial details involved in selling their business. Owners frequently concentrate on operations and may neglect how to allocate proceeds from a sale in a tax-effective manner. Additionally, without estate planning, owners may miss opportunities to ensure beneficiaries and loved ones are taken care of.
How Correct Capital Helps: Our team supports business owners in exit planning, helping them decide how to manage the proceeds from a sale. We aim to identify the purpose of sale proceeds and apply estate planning principles, so beneficiaries are accounted for and taxes are efficiently managed.
Tax Planning in Garland, TX | Correct Capital Wealth Management
At Correct Capital, our Garland, TX financial advisors and tax planners understand how essential the financial health of your family or business is, both now and in 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. With tax laws constantly evolving, it’s essential to have a strong team in place, including your Garland, TX financial advisor, tax professional, and attorney. If you need help with tax planning, retirement strategies, or other financial services in Garland, TX, call Correct Capital today at 877-930-4015 or get in touch online.
