Tax Planning
Tax Planning in Lake St. Louis, MO. Tax liability refers to how much you owe in taxes to local, state, and federal governments. While taxes may be one of the two certainties in life, The IRS allows for several ways to reduce your tax liability. Tax planning is also essential for successful retirement planning. At Correct Capital, we partner with local Lake St. Louis, MO individuals, families, and businesses to find creative and time-tested ways to reduce how much they owe. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out through our website, or read the article below to learn how diligent tax planning can keep more money in your account both now and in the future.
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Tax Planning for Lake St. Louis, MO Individuals and Families
Diligent tax planning can help individuals and families put more in their retirement accounts and have extra money for the short-term. Some things to take advantage of when tax planning in Lake St. Louis, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked amount 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 one by one. The drawback is that it will take longer to complete your return, and you have to prove each deduction.
- Evaluate How You Are Saving For Retirement —
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. Savings put into a Roth IRA are not deductible, but you will not be taxed on the withdrawal, as long certain requirements are met. Your unique situation will determine whether a Traditional or Roth IRA is preferable for your tax planning. For instance, if you anticipate being in a higher tax bracket in the future, you can transfer 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 have a 401(k) plan with your employer, 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, plus an extra $6,500 if you're 50 or older. For 2023, you can deposit up to $22,500 or $30,000.
If you're self-employed, you can open up an individual retirement plan, like a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you sell securities 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 you may be able to deduct higher losses in the future.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can write off 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 kid's tuition or for career-boosting classes for you early for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS reports that roughly 95% of married couples file jointly. It's the only way to qualify for certain tax credits and reductions. But, if both spouses have substantial earnings, filing separately may reduce their combined tax liability. If one spouse received substantial medical care in a given year, it may be preferable to file separately to meet the 7.5% limit for medical deductions.
- Contribute to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. Qualifying organizations include:
- 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," under the condition that the donations are used for charity
- Cemetery organizations
- Any government entities, as long as the donations are meant to benefit the public
- In many cases, a Canadian, Mexican, or Israeli organization, under the condition that the organization meets the criteria for a charity under United States law
If you save 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 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 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 adviser for your tax planning in Lake St. Louis, MO|With the help a financial adviser in Lake St. Louis, MO, you can not only reduce your tax liability this year, but understand how to get further benefits once you retire.
Tax Planning for Lake St. Louis, MO Businesses
Business owners can use effective tax planning to retain more money in their business. Ways to owe less in taxes when tax planning for your Lake St. Louis, 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.
- 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 offers new benefits for employers who offer 401(k)s and SIMPLE IRAs with automatic enrollment, so it may be best to meet with a financial advisor in Lake St. Louis, MO about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While you would need to contribute several hundred thousand dollars per year, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Merely offering more money can result in higher taxes for you. Talk to your employees about whether or not they would be willing to accept fringe benefits as part of their compensation, instead of just giving them a higher paycheck. Common fringe benefits include medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, more paid time off, 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 counting the reimbursement as income.
- Have Your Family Work For The Business —
Your kids can work for you tax-free on income up to $12,000, and you can help kick-start their retirement savings through an account like a ROTH IRA. You can double how much you're allowed to put into retirement plans if 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. You can make the deduction in two ways:
- 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 July to December in 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and calculate if your deduction would be more than the standard mileage rate
- Consider Carryover Deductions —
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.
US lawmakers are always making new tax laws for businesses, or changing old ones. A key benefit of consulting with a professional Lake St. Louis, MO tax planner is that they will work with you and the person who prepares your taxes to determine if there are ways to improve your long-term financial success.
Other services we offer in Lake St. Louis, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Lake St. Louis, MO | Correct Capital Wealth Management
At Correct Capital, our Lake St. Louis, MO tax planners 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 do what's best for you and only you. With tax law always changing, it's important to put a team around you that will help, like your Lake St. Louis, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial needs in Lake St. Louis, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
