Tax Planning
Tax Planning in Jefferson County, MO. Tax liability is how much you owe in taxes to local, state, and federal authorities. While 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 essential to planning the golden years of your dreams. At Correct Capital, we partner with Jefferson County, MO individuals, families, and businesses in the Jefferson County, MO area to find creative and time-tested strategies for reducing their tax burden. Call Correct Capital's tax planners and fiduciary advisors today at 314-930-401(k), contact us online, or read on to discover how judicious tax planning can keep more money in your account both now and down the road.
Tax Planning for Jefferson County, MO Individuals and Families
Prudent tax planning is essential for individuals and families who want to increase their retirement savings and have extra money for the short-term. Ways to reduce your tax liability when tax planning in Jefferson County, 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, 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 more income that shouldn't be taxed than the above, you can count up each deduction you're eligible for individually. The drawback is that filing will be more complicated, and you will have to document why you are eligible for the deduction when you send your returns.
- Review 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 can be deducted from your taxable income, and you pay taxes on it when you withdraw it. Roth IRA contributions are not deductible, but you will not be taxed on the withdrawal, as long as you are over 59 1/2 and have had the account for at least five years. Your age, income, and other factors will determine which type of account is preferable in terms of tax planning. For instance, if you anticipate being in a higher tax bracket in the future, you can convert savings 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 have a 401(k) plan through your job, you can choose to have money deposited into your 401(k) account instead of it going to your paycheck. 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 with an extra $7,500.
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 the savings you put there from your taxable income.
- Tax-Loss Harvesting —
If you lose money on the sale of any stocks, bonds, or options, you can use that loss to reduce your taxable capital gains. Tax-loss harvesting is utilized more with short-term capital gains, as the tax rate is often higher than long-term. You can deduct up to $3,000 in capital gains losses per year, but additional losses can be carried over into future years.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can deduct those that are higher than 7.5% of your adjusted gross income. Paying property taxes early can also help you reduce your taxable income, 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 in order to qualify 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 have a high income, they may be in a lower tax bracket if they file separately. If one spouse has a lot of medical expenses, it may make sense to file separately to meet the 7.5% limit for medical deductions.
- Make Charitable Donations —
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," as long as the money are used for charity
- Cemetery companies
- Any government entities, under the condition that the funds are meant to benefit the public
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. 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 known as a qualified charitable distribution by transferring no more than $100,000 a year from a traditional IRA directly to a non-profit organization tax-free. If you are 72 or older, that donation qualifies as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in Jefferson County, MO|With the help a financial planner in Jefferson County, MO, you can not only reduce your tax liability this year, but understand how to get further benefits once you retire.
Tax Planning for Jefferson County, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Ways to reduce your tax liability when tax planning for your Jefferson County, 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 both your corporate and your individual tax rate.
- Assess Your Employees' Employer-Sponsored Retirement Plans —
There are many benefits to offering employees a retirement plan, and reducing your tax liability is chief among them. 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 Jefferson County, MO about how those changes affect your tax planning.
a good idea if you and your employees are both higher-earning. While an employer would need to contribute several hundred thousand dollars per year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can lead to higher employment tax costs. Talk to your employees about whether or not they would be willing to accept fringe benefits rather than just giving them more money. Common fringe benefits include medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, more paid time off, or paying for courses that help in their career.
You can also set up accountable plans to reimburse employees for business expenses without counting the reimbursement as income.
- Put Your Family On the Payroll —
If you hire your children, they do not have to pay taxes on their first $12,000 in income, and you can help them start saving for retirement through an account like a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- Use a Company Vehicle —
If you and your employees need to drive as part of the normal course of your business, you can deduct the transportation costs. There are two different means of deducting those costs:
- 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 the last half of 2022); or
- Document 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
- Look into Tax Loss Carryover —
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 advantage of consulting with a knowledgeable Jefferson County, MO tax planner is that they will work with you and the person who prepares your taxes to identify if there are ways to strengthen your long-term financial success.
Other services we offer in Jefferson County, 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 Jefferson County, MO | Correct Capital Wealth Management
At Correct Capital, our Jefferson County, MO financial advisors know strong financial health is key to your overall success. That is why we hold ourselves to the fiduciary standard: we are legally and ethically bound to do what's best for you and only you. With tax law always changing, you need a team around you that will help, like your Jefferson County, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial needs in Jefferson County, MO, call Correct Capital today at 314-930-401(k) or contact us online.
