Tax Planning
Tax Planning in Kirkwood, MO. Tax liability refers to how much you owe in taxes to local, state, and federal entities. While Uncle Sam will always get some portion of your earnings or profits, there are perfectly legal ways to reduce your tax liability. Tax planning is also key to planning the golden years of your dreams. At Correct Capital, we work with Kirkwood, MO individuals, families, and businesses in the Kirkwood, MO area to find creative and time-tested ways to reduce their tax liability. Call Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read the article below to discover how diligent tax planning can keep more money in your pocket both now and down the road.
Tax Planning for Kirkwood, MO Individuals and Families
Diligent tax planning can help individuals and families increase their retirement savings and have extra money for the short-term. Ways to reduce how much you owe when tax planning in Kirkwood, MO are:
- 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 disadvantage is that it will take longer to fill out your return, and you have to prove each deduction.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Savings you put into a traditional IRA can be deducted from your taxable income, and you pay taxes on it when you withdraw it. Money put into a Roth IRA do not affect your taxable income, 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 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 conversation, and enjoy tax-free withdrawals when you need the money in retirement.
If you contribute to a 401(k) plan through your job, you can choose to defer income from your paycheck and have it placed directly in your 401(k). You can place up to $20,500 to a 401(k) in 2022, plus an extra $6,500 if you're at least 50 years old. For 2023, you can contribute as much as $22,500 or $30,000.
If you're have freelance income, there are also retirement plans available, 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 offset the amount of capital gains tax you would be liable for if other securities sold at a profit. This strategy is utilized more 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 down the road.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, you can deduct those that exceed 7.5% of your adjusted gross income. Paying property taxes early can also help you reduce your taxable income, and you can pay for a child's tuition or for career-boosting classes for you early 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. 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 charities include:
- 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 U.S. federal, state, local, or Native governments and subdivisions, under the condition that the funds are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. law
If you open a Donor-Advised Fund, you can deduct a bulk amount now, while still being able to wait to decide how the funds will get distributed in the future.
If you are at least 70½ years old, you can make what's known as a qualified charitable distribution by transferring up to $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 consult with an experienced financial adviser for your tax planning in Kirkwood, MO|With the help a financial planner in Kirkwood, MO, you can not only reduce your tax liability this year, but understand how to get further benefits once you retire.
Tax Planning for Kirkwood, MO Businesses
With diligent tax planning, business owners can keep as much of their profits as possible. Ways to owe less in taxes when tax planning for your Kirkwood, MO business include:
- Assess the Structure of Your Business —
A lot goes into the structure of a business, and tax planning should be considered. 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 speak to a financial advisor in Kirkwood, 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 you would have to contribute several hundred thousand dollars each year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Merely offering more money can lead to higher taxes for you. Ask your employees if they would be open to fringe benefits rather than 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 paying for career-boosting courses.
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.
- 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. You can double how much you're allowed to put into retirement plans by having your spouse work for the business.
- Have 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. There are two different means of deducting those costs:
- Use 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
- 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 Tax Loss Carryover —
You're allowed to carryover some deductions into another year. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always changing. A key benefit of consulting with a knowledgeable Kirkwood, MO tax planner is that they will work with you and the person who prepares your taxes to discover if there are ways to strengthen your personal and business financial success.
Other services we offer in Kirkwood, 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
Tax Planning in Kirkwood, MO | Correct Capital Wealth Management
At Correct Capital, our Kirkwood, MO financial advisors know how important the financial health of your family or business is, both now and in the future. That is why we hold ourselves to the fiduciary standard: we are legally and ethically bound to act in your best interest. With tax law always changing, it's important to put a team around you that will help, like your Kirkwood, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial needs in Kirkwood, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
