Tax Planning
Tax Planning in Imperial, MO. Tax liability refers to how much taxes you will need to pay to local, state, and federal authorities. While Uncle Sam will always get some portion of your earnings or profits, The IRS allows for several ways you can reduce how much you owe. Tax planning is also important for successful retirement planning. At Correct Capital, we partner with local Imperial, MO individuals, families, and businesses to find creative and proven ways to reduce how much they owe. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out online, or read on to discover how prudent tax planning can benefit you.
Tax Planning for Imperial, MO Individuals and Families
Smart tax planning is essential for individuals and families who want to 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 Imperial, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar figure that you can deduct from your taxable income. In 2022 and 2023, the standard deductions are:
2022
- $12,950 for single filers
- $25,900 for married, filing jointly
- $12,950 for married, filing separately
- $19,400 for head of household
2023
- $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 count up each deduction you're eligible for one by one. The downside is that filing will be more complicated, and you have to prove each deduction.
- Evaluate 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 the money is not taxed until you withdraw it. Money put into a Roth IRA do not affect your taxable income, but the money grows tax free. Your unique situation will determine what may be better for you for your tax planning. For example, if you expect your taxes to go up in the future, you can convert money 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 through your work, you can choose to defer income from your paycheck and have it placed directly in your 401(k). You can contribute 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 as much as $22,500 or $30,000.
If you're self-employed, you can open up an individual retirement plan, such as a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you sell stocks, bonds, or options at a loss, you can use that loss to reduce your taxable capital gains. Tax-loss harvesting is more common with short-term capital gains, as the tax rate is typically higher than long-term. You can deduct up to $3,000 in capital gains losses per year, but you may be able to deduct higher losses in future years.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, you can write off those that are greater than 7.5% of your adjusted gross income. Paying property taxes early can also lead to deductions, and you can pay tuition to an undergraduate, graduate and professional degree courses for your or a child, as well as courses that improve your job skills 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's the only way to qualify for certain tax credits and reductions. But, if both spouses are higher-earning individuals, they may be in a lower tax bracket if they file separately. If one spouse received substantial medical care in a given year, it may be preferable to file separately to qualify for the 7.5% limit for unreimbursed medical expenses.
- Contribute to Charity —
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 money are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the donations are meant to benefit the public
- In many cases, a Canadian, Mexican, or Israeli organization, as long as the organization meets the criteria for a charity under United States law
If you start 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 of age, you can make what's referred to as a qualified charitable distribution by transferring a maximum of $100,000 a year from a traditional IRA directly to a charity without having to pay taxes on it. If you are 72 or older, that donation qualifies as your required minimum distribution.
When you use a knowledgeable financial adviser for your tax planning in Imperial, MO|With the help a financial planner in Imperial, MO, they can help put more money in your pocket now while also setting you up for a financially secure retirement.
Tax Planning for Imperial, MO Business Owners
Business owners can use smart tax planning to keep more money in their business. Some things to consider when tax planning for your Imperial, MO business include:
- Review How Your Business Is Structured —
There are many things to consider when deciding how to structure or restructure your business. Structuring your business as an LLC, sole proprietorship, partnership, or S or C corporation will affect how much you pay in taxes both as a business and individually.
- Review the Retirement Plans You Offer Employees —
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 Imperial, MO about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While you would have to contribute several hundred thousand dollars each year, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Just offering raises can result in higher employment tax costs. See if your employees would be willing to accept other benefits as part of their compensation, instead of just giving them a raise. Examples that could help reduce your tax liability are medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also use accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without having to report them as employee income.
- Put Your Family On the Payroll —
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 such as a ROTH IRA. You can double how much you're allowed to put into retirement plans if your spouse work for the business.
- Use a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and subtract transportation costs from your taxable income. 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 July to December in 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 Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over into subsequent years. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always changing. One benefit of consulting with a professional Imperial, MO tax planner is that they will work with you and the person who prepares your taxes to determine if there are ways to strengthen your long-term financial success.
Other services we offer in Imperial, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Imperial, MO | Correct Capital Wealth Management
At Correct Capital, our Imperial, MO financial advisors know how important the financial health of your family or business is, both now and in the future. That's why we give our I.O.U. promise; all the advice we give you will be independent, objective, and unbiased. With tax law always changing, it's important to put a team around you that will help, like your Imperial, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial services in Imperial, MO, call Correct Capital today at 877-930-4015 or contact us online.
