Tax Planning
Tax Planning in Glendale, 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 Glendale, CA people, families, and companies to find inventive and reliable ways to reduce their tax burden. 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.
Tax Planning for Glendale, CA Individuals and Families
Proactive tax planning can help individuals and families grow their retirement savings and offer them more money for both today and in the near future. Here are some key points when tax planning in Glendale, CA:
- Standard Deduction vs. Itemizing —
The standard deduction is a preset 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 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 Glendale, CA can help determine whether using the standard deduction or itemizing is more beneficial.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both present unique tax benefits. A traditional IRA allows for contributions that may be deductible, with taxes deferred until you withdraw funds. On the other hand, Roth IRAs do not offer a deduction for contributions, yet allow your money to grow tax-free. The best option depends on your individual financial picture and tax outlook. If you expect future tax rates to increase, a Roth conversion, or moving funds from a traditional IRA to a Roth IRA, might be wise to lock in tax-free growth while paying taxes upfront.
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. 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. This strategy is commonly used with short-term capital gains, as these are usually taxed more heavily than 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 —
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 —
Roughly 95% of married individuals file jointly, as this is required for some tax benefits and credits. However, if one spouse is a higher earner, filing separately might place them in a lower tax bracket. If one spouse incurs significant medical expenses, it might be advantageous to file separately to meet the 7.5% threshold for medical deductions.
- Make Charitable Donations —
By donating to qualifying organizations, you may deduct up to 60% of your adjusted gross income. 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
- Organizations managing cemeteries
- Government agencies at any level within the U.S. when funds are for public benefit
- 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.
If you are over 70½, you can make a qualified charitable distribution by transferring up to $105,000 annually from a traditional IRA directly to a charity, tax-free. Once you’re 73 or above, the donation can also be applied as your required minimum distribution, potentially lowering both future distribution requirements and tax obligations.
When you choose an experienced financial adviser for tax planning in Glendale, CA, you’re able to reduce current tax liability while planning for taxes well into 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 Glendale, CA Individuals and Families
Smart tax planning is vital for your family’s overall financial security. Yet, many people unintentionally make errors that could result in higher tax liabilities or missed savings opportunities. Here are a few frequent tax planning mistakes and ways Correct Capital can assist in preventing them:
- Not Maximizing Retirement Contributions —
When you don’t contribute the maximum allowable to tax-advantaged retirement accounts like Traditional IRAs, Roth IRAs, or 401(k)s, you may miss out on valuable tax deductions and long-term growth.
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: 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 —
When financial records are disorganized, it’s easier to overlook deductions and face issues at tax time. Proper documentation is critical for substantiating claims, especially during audits.
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 —
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 —
Major life events like marriage, divorce, having a child, or buying a home can have a substantial impact on your tax situation. 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. Neglecting estimated tax payments may result in penalties.
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) —
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 —
Ignoring options like 529 college savings plans can lead to missed tax benefits when 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 —
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 —
Not properly documenting charitable donations can lead to missed tax deductions.
How Correct Capital Helps: We help you plan charitable donations to take full advantage of tax benefits, offering assistance with Qualified Charitable Distributions when applicable.
Tax Planning for Glendale, CA Business Owners
Business owners in Glendale, CA can use strategic tax planning to keep more revenue within their business. Consider these points when tax planning for your Glendale, CA business:
- Review the Structure of Your Business —
The structure of your business impacts tax planning and should be carefully considered. Structuring your business as an LLC, sole proprietorship, partnership, or S or C corporation will affect both corporate and individual 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 Glendale, CA about retirement plan tax benefits is recommended.
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 —
Bringing family into the business offers tax perks, such as allowing children to work tax-free up to $14,600, and they can even start contributing to a ROTH IRA. If your spouse works in the business, you may also double your retirement contributions.
- Use a Company Vehicle —
Depending on your business activities in Glendale, CA, both you and your employees could use a company vehicle and deduct the associated costs. You can take this deduction using one of two methods:
- Deduct 67 cents per mile using the standard mileage rate, which applies to gas and electric vehicles alike; or
- Maintain records of actual costs like maintenance, registration, and fuel to calculate whether this deduction is greater 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. Some options that may help lower your tax costs include health insurance, group life insurance, childcare assistance, travel reimbursements, meal programs, paid family leave, and education reimbursements.
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. Potential carryover deductions are home office deductions, net operating losses, business credits, and capital losses.
Tax laws for businesses are constantly evolving. One advantage of working with a professional Glendale, 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 Glendale, CA 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 —
Failing to pay or underpaying quarterly estimated taxes can result in IRS penalties and interest charges. This is especially common among small businesses, freelancers, or companies with variable income.
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. 401(k)s, SEP IRAs, and Solo 401(k)s offer significant tax advantages for business 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. Such a narrow focus may cause missed opportunities for reinvestment or tax-efficient growth.
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 —
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. Lacking estate planning, business owners risk missing chances to provide for beneficiaries and loved ones.
How Correct Capital Helps: We assist business owners with exit planning, guiding them in making informed decisions on how to allocate sale proceeds. Our approach involves identifying the purpose of the funds and applying estate planning strategies, which consider beneficiaries and minimize taxes.
Other services we offer in Glendale, CA include:
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
Tax Planning in Glendale, CA | Correct Capital Wealth Management
Our Glendale, CA 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. To uphold your trust, we commit to the fiduciary standard and our I.O.U. promise—all advice is independent, objective, and unbiased. With tax laws constantly evolving, it’s essential to have a strong team in place, including your Glendale, CA financial advisor, tax professional, and attorney. For support with tax planning, retirement planning, or any other financial concerns in Glendale, CA, contact Correct Capital at 877-930-4015 or reach out online.
