Tax Planning
Tax Planning in Lemay, MO. Tax liability is how much you owe in taxes to local, state, and federal authorities. Even though Uncle Sam will always collect some portion of your earnings or profits, The IRS allows for several 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 work with local Lemay, MO individuals, families, and businesses to find creative and proven strategies for reducing their tax liability. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us through our website, or read the article below to learn how prudent tax planning can keep more money in your account both now and down the road.
Tax Planning for Lemay, 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 consider when tax planning in Lemay, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is flat 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 itemize your return. The disadvantage is that doing your taxes takes longer, 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 may be fully or partially deductible, and the money is not taxed until you withdraw it. Roth IRA contributions cannot be deducted from your taxable income, but the money grows tax free. Your age, income, and other factors will determine whether a Traditional or Roth IRA is preferable for your tax planning. For example, if you expect your taxes to go up in the future, you can transfer savings from a traditional IRA to a Roth IRA to pay taxes on the transfer, while allowing the money to grow tax-free.
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 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 with an extra $7,500.
If you're self-employed, you can open up an individual retirement plan, 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. This strategy is utilized more with short-term capital gains, as the tax rate is usually higher than long-term. The maximum deductible amount is $3,000 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 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 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 —
More than 9 out of 10 married couples file jointly. It helps couples qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. But, if both spouses are higher-earning individuals, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, it may be preferable to file separately to qualify for the 7.5% threshold for medical deductions.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. 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 donations are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the donations are meant to benefit the public
- Often, 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 deduct a bulk amount 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 known as a qualified charitable distribution by transferring no more than $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 an experienced financial adviser for your tax planning in Lemay, MO|With the assistance of a financial planner in Lemay, MO, they can help put more money in your pocket now while also setting you up for a financially secure future.
Tax Planning for Lemay, MO Businesses
Business owners can use smart tax planning to retain more money in their business. Some things to consider when tax planning for your Lemay, 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 have consequences for how much you pay in taxes both as a business and personally.
- Assess the Retirement Plans You Offer Employees —
Offering your employees retirement plans, such as 401(k)s, 403(b)s, and other defined contribution plans is a great way to reduce your tax liability. 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 Lemay, MO about how those changes affect your tax planning.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While an employer would need to considerable sums of money each year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Only 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 giving them a higher paycheck. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or continuing education reimbursement.
You can also use accountable plans to reimburse employees for business expenses without counting the reimbursement as 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 start saving for retirement through an account 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 —
If you and your employees need to drive as part of the normal course of your business, you can deduct the transportation costs. There are two different means of deducting those expenses:
- 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 July to December in 2022); or
- Document your actual expenses, like maintenance, registration fees, and gas, and figure out 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 subsequent years. These can include 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. One benefit of consulting with a professional Lemay, MO tax planner is that they will work with you and the person who prepares your taxes to discover if there are ways to improve your personal and business financial success.
Other services we offer in Lemay, 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 Lemay, MO | Correct Capital Wealth Management
At Correct Capital, our Lemay, MO tax planners know strong financial health is essential to your overall success. 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 Lemay, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial services in Lemay, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
