Tax Planning
Tax Planning in Irvine, CA. 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, although we do not provide tax advice, we partner with local Irvine, CA individuals, families, and businesses to find inventive and reliable ways to reduce their tax obligations. We could suggest maximizing deductible retirement contributions, which could reduce tax costs. 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.
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Tax Planning for Irvine, CA Individuals and Families
Smart tax planning can help individuals and families build their retirement savings and give them more money for both now and years to come. Consider these elements when tax planning in Irvine, CA:
- Standard Deduction vs. Itemizing —
The standard deduction is a automatic amount that you can deduct from your taxable income without additional documentation. 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 Irvine, CA can assist in determining whether claiming the standard or itemized deduction is more advantageous.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both provide tax advantages, though in different ways. With a traditional IRA, your contributions may be deductible, and you defer taxes until you take distributions. Roth IRA contributions, in contrast, are not deductible but allow for tax-free growth on your investments. Which account benefits you most will depend on your specific tax planning needs. 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). For 2024, you can contribute up to $23,000 to a 401(k), plus an extra $7,500 if you are over age 50.
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, enabling you to deduct your contributions.
- Tax-Loss Harvesting —
By selling securities at a loss, you can offset capital gains taxes owed on gains from other investments. This approach is particularly beneficial for short-term capital gains, which are often taxed at higher rates than 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 —
If you have unreimbursed medical expenses, you may be able to deduct amounts exceeding 7.5% of your adjusted gross income. Additionally, you might consider paying property taxes early (if allowed by your municipality), prepaying a child’s tuition, or covering your own career-enhancing classes 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. In situations where one spouse has substantial medical expenses, separate filing can help reach the medical deduction threshold.
- Make Charitable Donations —
Donating to eligible organizations allows you to deduct as much as 60% of your adjusted gross income. Per IRS Publication 526, eligible organizations may include the following:
- Non-profits that are religious, scientific, educational, or focused on preventing cruelty to animals or children
- Organizations dedicated to veterans
- Fraternal organizations under a "lodge system" provided funds are used for 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
- In some cases, Canadian, Mexican, or Israeli organizations if they qualify as U.S.-equivalent charities
*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 as much as $105,000 a year 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 Irvine, CA, you’re able to reduce current tax liability while planning for taxes well into retirement. Correct Capital is here to help you keep more of your money today and establish a financially secure future.
Common Tax Planning Mistakes for Irvine, CA Individuals and Families
Smart tax planning is vital for your family’s overall financial security. However, mistakes in tax planning can lead to paying more in taxes than necessary or missing out on potential savings. Below are some common tax planning errors and how Correct Capital can help you avoid them:
- Not Maximizing Retirement Contributions —
Failing to contribute the maximum allowable amounts to tax-advantaged retirement accounts, such as Traditional IRAs, Roth IRAs, or 401(k) plans, can lead to missed tax deductions and reduced growth potential over time.
How Correct Capital Helps: We evaluate your financial situation to ensure you’re contributing as much as feasible, which can reduce taxable income while building a strong retirement foundation.
- 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: 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 —
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 —
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 —
Significant life changes, such as marriage, divorce, becoming a parent, or purchasing a home, can greatly affect your tax obligations. Neglecting to adjust for these changes can lead to unexpected tax liabilities.
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 —
Income that doesn’t undergo withholding, such as freelance or investment income, often requires estimated tax payments. Without making these payments, you could face fines and interest charges.
How Correct Capital Helps: Our team assists in creating a cash reserve plan to ensure you meet estimated tax obligations, reducing the risk of penalties.
- Not Utilizing Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) —
HSAs and FSAs allow for tax-efficient healthcare spending, but they’re often underutilized by eligible individuals.
How Correct Capital Helps: We help you explore the advantages of HSAs and FSAs, advising on how pre-tax contributions for healthcare can lower your taxable income.
- 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 —
Withholding too much or too little tax from your paycheck often leads to surprises at tax time, like large refunds or owing taxes.
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: Our advisors help you strategize charitable contributions to maximize deductions, including guidance on Qualified Charitable Distributions if eligible.
Tax Planning for Irvine, CA Business Owners
Business owners in Irvine, CA can use strategic tax planning to keep more revenue within their business. Consider these points when tax planning for your Irvine, 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 —
Providing retirement plans such as 401(k)s, 403(b)s, or other defined contribution plans is an effective way to reduce tax liability. With changes under the "SECURE" Act of 2019, speaking to a financial advisor in Irvine, 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 —
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. If your spouse works in the business, you may also double your retirement contributions.
- Use a Company Vehicle —
Depending on your business activities in Irvine, CA, both you and your employees could use a company vehicle and deduct the associated costs. There are two options for claiming this deduction:
- Deduct 67 cents per mile using the standard mileage rate, which applies to gas and electric vehicles alike; 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 —
When some deductions are unavailable this year, they may be eligible for carryover into future years. 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 Irvine, 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 Irvine, CA Businesses
Effective tax planning allows businesses of all sizes to reduce tax liabilities and increase profitability. Yet, numerous businesses make frequent tax errors that result in increased tax bills, overlooked deductions, and potential penalties. Listed below are typical tax planning mistakes businesses make and how Correct Capital assists in avoiding them.
- Not Paying Estimated Quarterly Taxes —
Businesses may overlook or underpay quarterly estimated taxes, which can lead to penalties and interest from the IRS. Small businesses, freelancers, and companies with fluctuating income are particularly susceptible to this.
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 —
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 —
Many companies prioritize short-term tax savings over long-term profitability and growth. 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. Often focused on day-to-day business, owners can overlook how to handle proceeds from a sale to minimize taxes. Without proper estate planning, owners might not fully address their loved ones’ and beneficiaries’ financial security.
How Correct Capital Helps: We assist business owners with exit planning, guiding them in making informed decisions on how to allocate sale proceeds. We focus on defining the purpose of these funds and addressing them from an estate planning perspective, ensuring beneficiaries are considered and taxes are minimized through careful planning.
Tax Planning in Irvine, CA | Correct Capital Wealth Management
Correct Capital’s financial advisors and tax planners in Irvine, CA recognize the importance of financial well-being for your family or business, today and into the future. 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 Irvine, CA financial advisor, tax professional, and attorney. For support with tax planning, retirement planning, or any other financial concerns in Irvine, CA, contact Correct Capital at 877-930-4015 or reach out online.
