Tax Planning
Tax Planning in Gilbert, AZ. Tax liability refers to the amount you owe in taxes to local, state, and federal authorities. While it’s inevitable that a part of your earnings or profits goes to taxes, there are numerous legal strategies to lessen your tax burden. Tax planning is also vital to successful retirement planning. At Correct Capital, although we do not provide tax advice, we work alongside local Gilbert, AZ individuals, families, and businesses to discover creative and proven ways to decrease their tax obligations. For instance, we might advise an individual to maximize deductible contributions to their retirement plan, which can help lessen tax costs. Reach out to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read on to see how effective tax planning can make a difference.
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Tax Planning for Gilbert, AZ Individuals and Families
Proactive tax planning can help individuals and families increase their retirement savings and offer them more money for both the present and the future. Here are some key points when tax planning in Gilbert, AZ:
- Standard Deduction vs. Itemizing —
The standard deduction is a preset 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 drawback is that itemizing can be time-consuming and requires proof of each deduction. A financial planner in Gilbert, AZ can assist in determining whether using the standard deduction or itemizing is more suitable.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both provide tax advantages, though in different ways. Contributions to a traditional IRA may be fully or partially deductible, and taxes are only applied upon withdrawal. On the other hand, Roth IRAs do not offer a deduction for contributions, yet allow your money to grow tax-free. 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 defer income from your paycheck directly to your 401(k). The 401(k) contribution limit for 2024 is $23,000, along with an additional $7,500 for individuals 50 or older.
Freelancers or self-employed individuals can open up personal retirement plans tailored to their needs. Options include a Simplified Employee Pension (SEP) IRA or a One-Participant 401(k) Plan, with contributions that can be deducted.
- Tax-Loss Harvesting —
Selling securities at a loss allows you to reduce the capital gains tax on profitable sales. Tax-loss harvesting is especially useful for short-term gains, where tax rates are higher than for long-term gains. You can deduct up to $3,000 in capital losses each year, with any remaining losses rolled over into future tax 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. 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. 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:
- Religious, scientific, educational, or anti-cruelty non-profit organizations for animals and children
- Organizations dedicated to veterans
- A domestic fraternal organization that operates under a "lodge system" as long as the funds are directed toward charity
- Cemetery companies or organizations
- Federal, state, local, or Native government entities, provided funds are for public purposes
- In some cases, Canadian, Mexican, or Israeli organizations if they qualify as U.S.-equivalent charities
*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.
By working with an experienced financial adviser for tax planning in Gilbert, AZ, you can reduce your tax liability this year and create a plan for managing taxes through retirement. At Correct Capital, we aim to put more money in your pocket now while preparing you for a secure financial future.
Common Tax Planning Mistakes for Gilbert, AZ 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 are a few frequent tax planning mistakes and ways Correct Capital can assist in preventing 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: Our team assesses your finances to confirm you’re maximizing contributions, minimizing your tax burden while enhancing your retirement savings.
- 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 advisors may review your tax return to see if you’ve claimed all available credits and deductions, aiming to maximize your refund (if eligible) or minimize any amount owed.
- 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: 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 —
Overlooking the tax impact of investment decisions can diminish your returns. This may include neglecting asset location strategies or failing to harvest tax losses.
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 —
Major life events like marriage, divorce, having a child, or buying a home can have a substantial impact on your tax situation. Neglecting to adjust for these changes can lead to unexpected tax liabilities.
How Correct Capital Helps: We collaborate with you to update your tax planning strategies in response to life changes, ensuring you benefit from new deductions or credits and stay compliant with tax regulations.
- Underestimating Estimated Tax Payments —
If you earn income not subject to withholding, such as freelance or investment income, estimated tax payments may be necessary. Without making these payments, you could face fines and interest charges.
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) —
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 —
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 guide you in setting up education savings accounts that provide tax-deferred growth and may offer 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: We assist in adjusting your W-4 form to ensure correct withholding, helping improve cash flow and avoid surprises when filing taxes.
- Missing Opportunities for Charitable Contributions —
If you don’t track or plan your charitable contributions, you could lose valuable deduction opportunities.
How Correct Capital Helps: We assist with planning your charitable giving to maximize tax benefits, including helping with Qualified Charitable Distributions (QCDs) if you qualify.
Tax Planning for Gilbert, AZ Business Owners
Business owners in Gilbert, AZ can benefit from effective tax planning to retain more money within their business. Consider these points when tax planning for your Gilbert, AZ business:
- Review the Structure of Your Business —
The structure of your business impacts tax planning and should be carefully considered. Whether you choose an LLC, sole proprietorship, partnership, or S or C corporation, your tax obligations for both the business and yourself will be impacted.
- Review the Retirement Plans You Offer Employees —
Providing retirement plans such as 401(k)s, 403(b)s, or other defined contribution plans is an effective way to reduce tax liability. The "SECURE" Act of 2019 changed retirement plan rules for both small and large employers, so it’s wise to consult a financial advisor in Gilbert, AZ about how these changes impact tax planning.
If you’re a high-earning business owner with high-income employees, a Cash Balance Pension Plan could be advantageous, though it requires large contributions.
- Have Your Family Work For The Business —
Employing family members can yield tax advantages. Children can earn up to $14,600 without paying taxes and could 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 the nature of your Gilbert, AZ business, you and your employees may be able to use a company vehicle and deduct the transportation costs. You can take this deduction using one of two methods:
- 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 —
Raising employee salaries may lead to increased employment tax costs. Consider whether employees would prefer fringe benefits instead of direct wage increases. 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.
Accountable plans can also be used to reimburse employees for expenses like travel, meals, or entertainment without these amounts being reported as employee 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. Examples of carryover deductions include home office expenses, net operating losses, business credits, and capital losses.
Tax regulations for businesses are always in flux. Partnering with a professional tax planner in Gilbert, AZ means they work with you and your tax expert to identify strategies for enhancing long-term financial outcomes.
Common Tax Planning Mistakes for Gilbert, AZ Businesses
Efficient tax planning can help businesses reduce tax burdens and boost 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. This issue frequently affects small businesses, freelancers, and companies with irregular income.
How Correct Capital Helps: We help businesses accurately calculate and schedule estimated tax payments, ensuring compliance with IRS deadlines and preventing unnecessary 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: We work with businesses to set up and maximize retirement plans, which reduce taxes while also helping attract and retain talent.
- 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 approach can prevent businesses from taking advantage of strategic investment or growth opportunities.
How Correct Capital Helps: We deliver thorough tax planning to support future growth, optimize reinvestment, and ensure efficient cash flow management.
- Neglecting Exit and Estate Planning —
A succession plan addressing the financial aspects of selling a business is often overlooked by owners. 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: We provide assistance in exit planning, helping business owners determine where to allocate sale proceeds. 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 Gilbert, AZ | Correct Capital Wealth Management
Our Gilbert, AZ financial advisors and tax planners at Correct Capital know that your financial security—whether for family or business—is crucial now and in the long term. That’s why we adhere to the fiduciary standard and our I.O.U. promise: all the advice we offer is independent, objective, and unbiased. Since tax laws are always changing, it’s vital to surround yourself with a solid team, such as your Gilbert, AZ financial advisor, tax professional, and legal advisor. If you need help with tax planning, retirement strategies, or other financial services in Gilbert, AZ, call Correct Capital today at 877-930-4015 or get in touch online.
