Tax Planning
Tax Planning in Lincoln, NE. Tax liability refers to the amount you owe in taxes to local, state, and federal authorities. While it’s inevitable that a part of your earnings or profits goes to taxes, there are numerous legal strategies to lessen your tax burden. Tax planning is also essential for successful retirement planning. At Correct Capital, we don’t give tax advice; however, we collaborate with local Lincoln, NE residents, families, and business owners to discover creative and proven ways to decrease their tax liability. We could suggest maximizing deductible retirement contributions, which could reduce tax costs. Reach out to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read on to see how effective tax planning can make a difference.
Tax Planning for Lincoln, NE Individuals and Families
Proactive tax planning can help individuals and families increase their retirement savings and give them more money for both the present and the future. Consider these elements when tax planning in Lincoln, NE:
- Standard Deduction vs. Itemizing —
The standard deduction is a automatic amount that reduces your taxable income without needing specific proof of deductions. In 2024, the standard deductions are:
- $14,600 for single filers
- $29,200 for married, filing jointly
- $14,660 for married, filing separately
- $21,900 for head of household
If your deductible expenses exceed these amounts, you may benefit from itemizing your deductions, where you list each eligible deduction separately. The drawback is that itemizing can be time-consuming and requires proof of each deduction. A financial planner in Lincoln, NE can help determine whether taking the standard deduction or itemizing is more advantageous.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits, but in distinct ways. With a traditional IRA, your contributions may be deductible, and you defer taxes until you take distributions. On the other hand, Roth IRAs do not offer a deduction for contributions, yet allow your money to grow tax-free. The best option depends on your individual financial picture and tax outlook. If you expect future tax rates to increase, a Roth conversion, or moving funds from a traditional IRA to a Roth IRA, might be wise to lock in tax-free growth while paying taxes upfront.
If you have a 401(k) plan with your employer, you can defer income from your paycheck directly to your 401(k). The 401(k) contribution limit for 2024 is $23,000, along with an additional $7,500 for individuals 50 or older.
If you're self-employed or have freelance income, you may also establish a retirement plan that suits your situation. Options include a Simplified Employee Pension (SEP) IRA or a One-Participant 401(k) Plan, with contributions that can be deducted.
- Tax-Loss Harvesting —
If you sell securities at a loss, you can offset the amount of capital gains tax owed on profits from other securities. This approach is particularly beneficial for short-term capital gains, which are often taxed at higher rates than long-term gains. The IRS allows up to $3,000 in capital loss deductions annually, and any unused losses may be applied to future tax years.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you may be able to deduct amounts exceeding 7.5% of your adjusted gross income. Other potential deductions include prepaying property taxes if permitted, covering future tuition costs, or investing in career-advancing courses to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
Roughly 95% of married individuals file jointly, as this is required for some tax benefits and credits. For high-income spouses, filing separately may reduce their tax bracket, depending on income differences. In situations where one spouse has substantial medical expenses, separate filing can help reach the medical deduction threshold.
- Make Charitable Donations —
By donating to qualifying organizations, you may deduct up to 60% of your adjusted gross income. According to IRS Publication 526, qualifying organizations include:
- Non-profits that are religious, scientific, educational, or focused on preventing cruelty to animals or children
- Non-profits supporting veterans
- A domestic fraternal organization that operates under a "lodge system" as long as the funds are directed toward charity
- Cemetery companies or organizations
- Federal, state, local, or Native government entities, provided funds are for public purposes
- In some cases, Canadian, Mexican, or Israeli organizations if they qualify as U.S.-equivalent charities
*According to IRS Publication 526 (2023), Charitable Contributions
If you start a Donor-Advised Fund, you’re able to contribute a significant amount right away for an instant tax deduction and suggest distributions over the coming years.
If you are over 70½, you can make a qualified charitable distribution by transferring up to $105,000 per year from a traditional IRA directly to a charity, tax-free. Once you’re 73 or above, the donation can also be applied as your required minimum distribution, potentially lowering both future distribution requirements and tax obligations.
By working with an experienced financial adviser for tax planning in Lincoln, NE, you can reduce your tax liability this year and create a plan for managing taxes through retirement. At Correct Capital, we aim to put more money in your pocket now while preparing you for a secure financial future.
Common Tax Planning Mistakes for Lincoln, NE Individuals and Families
Good tax planning plays an essential role in ensuring your family’s financial well-being. However, mistakes in tax planning can lead to paying more in taxes than necessary or missing out on potential savings. Below are some common tax planning errors and how Correct Capital can help you avoid them:
- Not Maximizing Retirement Contributions —
By not maximizing contributions to retirement accounts like Traditional IRAs, Roth IRAs, or 401(k)s, you risk losing out on tax deductions and long-term growth opportunities.
How Correct Capital Helps: We review your financial situation to help you make the most of allowable contributions, lowering your taxes while securing a robust retirement future.
- Overlooking Available Tax Credits and Deductions —
Many people miss out on important tax credits and deductions, such as the Earned Income Tax Credit, Child Tax Credit, or deductions for education and medical expenses.
How Correct Capital Helps: We carefully examine your tax return to verify if you’ve taken advantage of all possible credits and deductions, helping to maximize refunds or reduce liabilities.
- Poor Record-Keeping —
A lack of organized financial records may result in missed deductions and complications at tax filing time, and without the right documents, you may have trouble supporting claims if audited.
How Correct Capital Helps: We assist you in setting up effective record-keeping systems and locating necessary documentation, ensuring all receipts and documents are properly organized and accessible when needed.
- Ignoring Tax-Efficient Investment Strategies —
Neglecting tax-efficient investment strategies, such as asset location or tax-loss harvesting, can erode overall returns.
How Correct Capital Helps: We help you implement tax-efficient investment strategies, including selecting the best vehicles and methods to lower taxes on dividends, interest, and gains.
- Failing to Plan for Life Changes —
Life events, including marriage, divorce, welcoming a child, or buying a property, often alter your tax landscape considerably. Neglecting to adjust for these changes can lead to unexpected tax liabilities.
How Correct Capital Helps: We collaborate with you to update your tax planning strategies in response to life changes, ensuring you benefit from new deductions or credits and stay compliant with tax regulations.
- Underestimating Estimated Tax Payments —
Income that doesn’t undergo withholding, such as freelance or investment income, often requires estimated tax payments. Neglecting estimated tax payments may result in penalties.
How Correct Capital Helps: We work with you to build cash reserves to cover estimated tax payments, helping you avoid penalties and interest fees.
- Not Utilizing Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) —
HSAs and FSAs provide tax advantages for covering medical costs, but many eligible individuals miss out by not contributing.
How Correct Capital Helps: We help you explore the advantages of HSAs and FSAs, advising on how pre-tax contributions for healthcare can lower your taxable income.
- Overlooking Education Savings Plans —
Failing to consider 529 college savings plans may mean missing valuable tax benefits for education savings.
How Correct Capital Helps: Our team assists you in establishing education savings plans that feature tax-deferred growth and potential state tax deductions.
- Not Reviewing Withholding Allowances —
Having too much or too little tax withheld from your paycheck can lead to either a large refund or an unexpected tax bill.
How Correct Capital Helps: Our team helps you adjust your W-4 form to achieve accurate withholding, enhancing cash flow and preventing unexpected tax bills.
- Missing Opportunities for Charitable Contributions —
Failing to document or strategize charitable donations can mean lost deductions.
How Correct Capital Helps: Our advisors help you strategize charitable contributions to maximize deductions, including guidance on Qualified Charitable Distributions if eligible.
Tax Planning for Lincoln, NE Business Owners
Business owners in Lincoln, NE can utilize tax planning strategies to maximize retained earnings in their business. Here are some factors to consider for tax planning in your Lincoln, NE business:
- Review the Structure of Your Business —
How your business is structured is key for tax planning and requires thoughtful consideration. Forming your business as an LLC, sole proprietorship, partnership, or S or C corporation will influence both the corporate and personal tax rates.
- Review the Retirement Plans You Offer Employees —
Providing retirement plans such as 401(k)s, 403(b)s, or other defined contribution plans is an effective way to reduce tax liability. The 2019 "SECURE" Act introduced new retirement plan rules, so consulting a financial advisor about their tax implications may be beneficial.
For business owners and employees with higher incomes, a Cash Balance Pension Plan can offer significant tax savings, even if it requires a sizable investment.
- Have Your Family Work For The Business —
Employing family members can yield tax advantages. Children can earn up to $14,600 without paying taxes and could start saving in a ROTH IRA. If your spouse works in the business, you may also double your retirement contributions.
- Use a Company Vehicle —
Based on your Lincoln, NE business type, you and your employees may qualify to use a company vehicle with deductible transportation costs. This deduction can be made in two ways:
- Take the standard mileage deduction of 67 cents per mile for gas and electric vehicles; or
- Maintain records of actual costs like maintenance, registration, and fuel to calculate whether this deduction is greater than the standard mileage rate.
- Consider Fringe Benefits For Your Employees —
Raising employee salaries may lead to increased employment tax costs. Explore the possibility of offering fringe benefits instead of wage raises. Possible fringe benefits that may reduce tax liabilities are health insurance, group life insurance, childcare assistance, transport reimbursements, meals, family or medical leave, and continuing education reimbursement.
Accountable plans allow for reimbursing employees for specific expenses, like travel, meals, or entertainment, without these amounts counting as income.
- Look into Carryover Deductions —
If certain deductions can’t be claimed this year, it may be possible to carry them forward into a future tax year. These may include deductions such as home office expenses, net operating losses, business credits, and capital losses.
Business tax laws change frequently. Partnering with a professional tax planner in Lincoln, NE means they work with you and your tax expert to identify strategies for enhancing long-term financial outcomes.
Common Tax Planning Mistakes for Lincoln, NE Businesses
Effective tax planning allows businesses of all sizes to reduce tax liabilities and increase profitability. However, many businesses fall into common tax mistakes that may lead to higher taxes, missed deductions, or even penalties. Below are some of the most common tax planning errors businesses make and how Correct Capital can help you avoid them.
- Not Paying Estimated Quarterly Taxes —
Some businesses miss or underpay estimated quarterly taxes, which often leads to IRS penalties and added interest. This is especially common among small businesses, freelancers, or companies with variable income.
How Correct Capital Helps: Our team assists in calculating and timing estimated tax payments to keep businesses compliant with IRS rules and avoid penalties.
- Neglecting Retirement Plan Contributions for Owners and Employees —
Many businesses don’t fully utilize retirement plan contributions as a way to lower taxable income. 401(k)s, SEP IRAs, and Solo 401(k)s offer significant tax advantages for business owners and employees.
How Correct Capital Helps: Our team helps set up and optimize retirement plans that lower taxes and serve as a tool for recruiting and retaining employees.
- Not Planning for Profitability and Cash Flow —
Some businesses only focus on minimizing their current tax bill, neglecting long-term growth and profitability. Such a narrow focus may cause missed opportunities for reinvestment or tax-efficient growth.
How Correct Capital Helps: Our team provides tax planning that goes beyond short-term cuts, supporting businesses in planning for growth, reinvesting, and handling cash flow efficiently.
- Neglecting Exit and Estate Planning —
Many business owners don’t establish a succession plan to handle the financial details involved in selling their business. While they may focus heavily on operations, they might miss planning for how to manage and allocate the sale proceeds in a tax-efficient way. Lacking estate planning, business owners risk missing chances to provide for beneficiaries and loved ones.
How Correct Capital Helps: Our team supports business owners in exit planning, helping them decide how to manage the proceeds from a sale. We aim to identify the purpose of sale proceeds and apply estate planning principles, so beneficiaries are accounted for and taxes are efficiently managed.
Other services we offer in Lincoln, NE include:
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
- High-Net-Worth Wealth Management
Tax Planning in Lincoln, NE | Correct Capital Wealth Management
Correct Capital’s financial advisors and tax planners in Lincoln, NE recognize the importance of financial well-being for your family or business, today and into the future. To uphold your trust, we commit to the fiduciary standard and our I.O.U. promise—all advice is independent, objective, and unbiased. As tax regulations evolve, it’s important to work with a team that includes your Lincoln, NE financial advisor, tax specialist, and attorney. For support with tax planning, retirement planning, or any other financial concerns in Lincoln, NE, contact Correct Capital at 877-930-4015 or reach out online.
