Tax Planning
Tax Planning in Lake St. Louis, MO. Tax liability is how much taxes you pay each year to local, state, and federal governments. While 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 to planning the golden years of your dreams. At Correct Capital, we partner with local Lake St. Louis, MO individuals, families, and businesses to find creative and proven strategies for reducing their tax burden. Call Correct Capital's financial and fiduciary advisors today at 314-930-4015, contact us through our website, or read the article below to see how prudent tax planning can keep more money in your account both now and in the future.
Tax Planning for Lake St. Louis, MO Individuals and Families
Diligent 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 how much you owe when tax planning in Lake St. Louis, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar figure that ensures all tax payers have at least some income that is not taxable. 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 your deductible income is more than the above, you can itemize your return. The downside 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 How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Contributions to a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Money 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 for your tax planning. For example, if you expect your taxes to go up in the future, you can move funds 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, or up to $27,000 if you're 50 or older. For 2023, you can deposit up to $22,500 with an extra $7,500.
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 sell stocks, bonds, or options at a loss, 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 write off those that exceed 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 —
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 considerable earnings, filing separately may reduce their combined tax liability. If one spouse received considerable medical treatment in a given year, it may be preferable to file separately to qualify for the 7.5% limit 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 organizations
- 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 have been organized as a charity under U.S. law
If you deposit money in 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 called a qualified charitable distribution by transferring up to $100,000 a year from a traditional IRA directly to a charity tax-free. If you are 72 or older, that donation counts as your required minimum distribution.
When you use an experienced financial adviser for your tax planning in Lake St. Louis, MO|With the assistance of 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 Business Owners
With diligent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Lake St. Louis, MO business include:
- Evaluate 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 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 offers new benefits for employers who offer 401(k)s and SIMPLE IRAs with automatic enrollment, so it may be best to consult a financial advisor in Lake St. Louis, MO about how those changes affect your tax planning.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While you must contribute several hundred thousand dollars each year, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Merely offering raises can result in higher employment tax costs. See if your employees would be open to fringe benefits as part of their compensation, instead of just rewarding them with 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 use accountable plans to pay employees back for business expenses 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 kick-start their retirement savings through an account such as a ROTH IRA. You can double your retirement plan contributions if your spouse work for the business.
- Buy a Company Vehicle —
Depending on the specifics 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:
- 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 whether those allow you to deduct more than the standard mileage rate would have
- Look into Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over 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 advantage of working with a professional Lake St. Louis, MO tax planner is that they will work with you and your tax professional to discover 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
- 401(k) For Small Business
- Small Business Retirement Plans
- Social Security Consultants Near Me
Tax Planning in Lake St. Louis, MO | Correct Capital Wealth Management
At Correct Capital, our Lake St. Louis, 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; all the advice we give you will be independent, objective, and unbiased. With tax law always changing, you need a team around you that will help, like your Lake St. Louis, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial needs in Lake St. Louis, MO, call Correct Capital today at 314-930-4015 or contact us online.
