Tax Planning
Tax Planning in Ladue, MO. Tax liability refers to how much taxes you will need to pay to local, state, and federal governments. 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 important for successful retirement planning. At Correct Capital, we work with local Ladue, MO individuals, families, and businesses to find creative and time-tested strategies for reducing how much they owe. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out online, or read on to discover how judicious tax planning can benefit you.
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Tax Planning for Ladue, MO Individuals and Families
Smart tax planning can help individuals and families increase their retirement savings and afford them more money for both now and the near future. Ways to reduce how much you owe when tax planning in Ladue, 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 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.
- Evaluate How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Savings 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 cannot be deducted from your taxable income, but the money grows tax free. Your unique situation will determine what may be better for you for your tax planning. For example, if you expect your taxes to go up down the road, you can transfer savings 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 have 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 deposit as much as $22,500 with an extra $7,500.
If you're have freelance income, you can open up an individual retirement plan, such as a One-Participant 401(k) Plan, and you can deduct the money you put there from your taxable income.
- Tax-Loss Harvesting —
If you sell stocks, bonds, or options at a loss, you can use that loss to reduce your taxable capital gains. Tax-loss harvesting is more common 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 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 greater than 7.5% of your adjusted gross income. Paying property taxes early can also lead to deductions, and you can pay for a child's tuition or for career-boosting classes for you early in order to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS reports that roughly 95% of married couples file jointly. It helps couples qualify for a higher standard deduction, in addition to a variety of tax credits not available to single filers. 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 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 for 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 U.S. federal, state, local, or Native governments and subdivisions, under the condition that the donations are meant to benefit the public
- Often, a Canadian, Mexican, or Israeli organization, as long as the organization would have been organized as a charity under U.S. law
If you deposit money in 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 in the future.
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 tax-free. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in Ladue, MO|With the help a financial adviser in Ladue, MO, they can help put more money in your pocket this year while also setting you up for a financially secure retirement.
Tax Planning for Ladue, MO Businesses
With prudent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Ladue, 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 how much you pay in taxes both as a business and personally.
- Evaluate 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 consult a financial advisor in Ladue, 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 need to considerable sums of money per year, the tax saving can be significant.
- Consider Other 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 rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, family or medical leave, or paying for career-boosting courses.
You can also use accountable plans to pay employees back for business expenses without counting the reimbursement as income.
- Put Your Family On the Payroll —
If you get your children on the payroll, they do not have to pay taxes on their first $12,000 in income, and you can help kick-start their retirement savings through an account such as a ROTH IRA. You can double your retirement plan contributions by having your spouse work for the business.
- 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. There are two different ways of deducting those expenses:
- 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 determine if your deduction would be more than the standard mileage rate
- Look into Tax Loss Carryover —
You're allowed to carryover some deductions into another year. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Congress are always making new tax laws for businesses, or adjusting old ones. A key benefit of consulting with a professional Ladue, MO tax planner is that they will work with you and the person who prepares your taxes to determine if there are ways to strengthen your long-term financial success.
Other services we offer in Ladue, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Ladue, MO | Correct Capital Wealth Management
At Correct Capital, our Ladue, MO financial advisors know how important the financial health of your family or business is, both now and in the future. 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 Ladue, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial needs in Ladue, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
