Tax Planning
Tax Planning in Jefferson County, MO. Tax liability is how much taxes you pay each year to local, state, and federal governments. Even though Uncle Sam will always collect some portion of your earnings or profits, there are perfectly legal ways to reduce how much money you have to pay. Tax planning is also key for successful retirement planning. At Correct Capital, we partner with local Jefferson County, MO individuals, families, and businesses to find creative and proven ways to reduce how much they owe. Call Correct Capital's financial planners and fiduciary advisors today at 877-930-4015, contact us online, or read the article below to see how diligent tax planning can benefit you.
Tax Planning for Jefferson County, MO Individuals and Families
Prudent tax planning can help individuals and families increase their retirement savings and have extra money for the short-term. Some things to take advantage of when tax planning in Jefferson County, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount 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 more income that shouldn't be taxed than the above, you can count up each deduction you're eligible for individually. The disadvantage is that doing your taxes takes longer, and you will have to document why you are eligible for the deduction when you send your returns.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Money you put into a traditional IRA can be deducted from your taxable income, and the money is not taxed until you withdraw it. Savings put into a Roth IRA are not deductible, but the money grows tax free. Your age, income, and other factors will determine what may be better for you in terms of tax planning. For instance, if you expect your taxes to go up down the road, you can move funds from a traditional IRA to a Roth IRA to pay taxes on the conversation, while allowing the money to grow tax-free.
If you contribute to a 401(k) plan through your work, 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 contribute up to $22,500 or $30,000.
If you're self-employed, there are also retirement plans available, such as 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. 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 higher 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 in order to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
More than 9 out of 10 married couples choose to file joint tax returns. It helps couples qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. However, if both spouses have a high income, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, it may make sense to file separately to meet the 7.5% threshold for medical deductions.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income via charitable donations. Accepted organizations are:
- Non-profit organizations that are religious, scientific, educational, or for the prevention of cruelty to animals and children
- Veterans' organizations
- A domestic fraternal organization operating under the "lodge system," as long as the funds are used for charity
- Cemetery companies
- Any government entities, under the condition that the donations are for public use
- Often, a Canadian, Mexican, or Israeli organization, as long as the organization would qualify as a charity under U.S. law
If you start a Donor-Advised Fund, you can get a tax reduction by putting money into it now, while still being able to wait to decide how the funds will get distributed down the road.
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 non-profit organization without having to pay taxes on it. If you are 72 or older, that donation qualifies as your required minimum distribution.
When you use an experienced financial adviser 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 plan out your taxes into retirement.
Tax Planning for Jefferson County, MO Business Owners
Business owners can use smart tax planning to keep more money in their business. Ways to reduce your tax liability when tax planning for your Jefferson County, MO business include:
- Assess 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 both your corporate and your individual tax rate.
- Evaluate the Retirement Plans You Offer Employees —
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 recommended to consult a financial advisor in Jefferson County, 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 would need to contribute several hundred thousand dollars per year, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Only offering raises can result in higher employment tax costs. See if your employees would be willing to accept fringe 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, sick leave, or paying for courses that help in their career.
You can also set up accountable plans to reimburse employees for business expenses without having to report them as employee income.
- Have Your Family Work For The Business —
If you hire your children, they do not have to pay taxes on their first $12,000 in income, and you can help them begin to save in a vehicle like a ROTH IRA. You can double how much you're allowed to put into retirement plans if your spouse work for the business.
- Buy a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and deduct the transportation costs. You can make the deduction in two ways:
- Use the standard mileage rate to deduct 58.5 cents per mile (for the first half of 2022) or 62.5 cents per mile (for the last six months of 2022); or
- Document your actual expenses, like maintenance, registration fees, and gas, and determine 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. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. One benefit of consulting with a knowledgeable Jefferson County, MO tax planner is that they will work with you and your tax professional to determine if there are ways to strengthen your personal and business 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
Tax Planning in Jefferson County, MO | Correct Capital Wealth Management
At Correct Capital, our Jefferson County, 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, you need a team around you that will help, like your Jefferson County, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial services in Jefferson County, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
