Tax Planning
Tax Planning in Imperial, MO. Tax liability refers to how much taxes you pay each year 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 to planning the golden years of your dreams. At Correct Capital, we partner with local Imperial, MO individuals, families, and businesses to find creative and time-tested ways to reduce their tax liability. Speak to Correct Capital's financial and fiduciary advisors today at 314-930-401(k), reach out online, or read on to see how prudent tax planning can benefit you.
Tax Planning for Imperial, MO Individuals and Families
Prudent tax planning is essential for individuals and families who want to increase their retirement savings and afford them more money for both now and the near future. Some things to consider when tax planning in Imperial, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat figure that reduces the amount of income you are taxed on. In 2022 and 2023, that flat-rate is:
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 it will take longer to fill out your return, and you will have to document why you are eligible for the deduction when you send your returns.
- Evaluate How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Money you put into a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Savings put into a Roth IRA cannot be deducted from your taxable income, but the money grows tax free. Your age, income, and other factors will determine whether a Traditional or Roth IRA is preferable in terms of tax planning. For instance, if you anticipate have more tax liability down the road, you can convert savings from a traditional IRA to a Roth IRA to pay taxes on the conversation, while allowing the money to grow tax-free.
If you have a 401(k) plan through your job, you can choose to have earnings deposited into your 401(k) account instead of it going to your paycheck. You can place up to $20,500 to a 401(k) in 2022, plus an extra $6,500 if you're 50 or older. For 2023, you can deposit up to $22,500 with an extra $7,500.
If you're self-employed, you can open up an individual retirement plan, like a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, you can offset the amount of capital gains tax you would be liable for if other securities sold at a profit. Tax-loss harvesting is utilized more with short-term capital gains, as the tax rate is usually higher than long-term. The maximum deductible amount is $3,000 per year, but additional losses can be carried over into future years.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, you can deduct those that are higher 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 for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS reports that roughly 95% of married couples choose to file joint tax returns. It's the only way to get certain tax credits and reductions. However, if both spouses earn high incomes, they may be in a lower tax bracket if they file separately. If one spouse has a lot of medical expenses, it may be preferable to file separately to meet the 7.5% threshold for medical deductions.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying 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," as long as the donations are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the funds are meant to benefit the public
- 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 deposit money in 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 referred to as a qualified charitable distribution by transferring a maximum of $100,000 a year from a traditional IRA directly to a charity tax-free. If you are 72 or older, that donation counts as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in Imperial, MO|With the assistance of a financial adviser in Imperial, MO, you can not only pay less in taxes this year, but understand how to get further benefits once you retire.
Tax Planning for Imperial, MO Business Owners
Business owners can use effective tax planning to retain more money in their business. Ways to reduce your tax liability when tax planning for your Imperial, MO business include:
- Review the Structure of Your Business —
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 have consequences for how much you pay in taxes both as a business and individually.
- Assess 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 offers new benefits for employers who offer certain retirement plans, so it may be best to meet with a financial advisor in Imperial, MO about how they may apply to your business.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While a business owner must contribute several hundred thousand dollars per year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can result in higher employment tax costs. Ask your employees if they would be willing to accept fringe benefits rather than just rewarding them with a raise. Common fringe benefits include 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 reimburse employees for certain expenses like travel, meals, or entertainment without having to report them as employee income.
- Have Your Family Work For The Business —
Children 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. If your spouse works in the business, you can double your retirement plan contributions.
- Buy a Company Vehicle —
If you and your employees need to drive as part of the normal course of your business, you can subtract transportation expenses from your taxable profits. You can make the deduction in two ways:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for January to June in 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 figure out if your deduction would be more than the standard mileage rate
- Look into Tax Loss Carryforward —
If you're not able to make certain deductions this year, you may be able to carry them over into subsequent years. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. A key benefit of working with an experienced Imperial, MO tax planner is that they will work with you and your tax professional to identify if there are ways to strengthen your personal and business 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
- 401(k) For Small Business
- Small Business Retirement Plans
- Social Security Consultants Near Me
Tax Planning in Imperial, MO | Correct Capital Wealth Management
At Correct Capital, our Imperial, MO financial advisors know strong financial health is essential 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, it's important to put a team around you that will help, like your Imperial, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Imperial, MO, call Correct Capital today at 314-930-401(k) or contact us online.
