Tax Planning
Tax Planning in Madison County, IL. Tax liability refers to how much you owe in taxes to local, state, and federal entities. While taxes may be one of the two certainties in life, The IRS allows for several ways to reduce how much money you have to pay. Tax planning is also key to planning the retirement of your dreams. At Correct Capital, we work with local Madison County, IL individuals, families, and businesses to find creative and proven ways to reduce their tax burden. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us online, or read the article below to discover how diligent tax planning can benefit you.
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Tax Planning for Madison County, IL Individuals and Families
Diligent tax planning can help individuals and families put more in their retirement accounts and afford them more money for both now and the near future. Some things to consider when tax planning in Madison County, IL are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar 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 individually. The downside is that it will take longer to fill out your return, and you have to prove each deduction.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. 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 instance, if you anticipate have more tax liability in the future, 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 have earnings deposited into your 401(k) account instead of it going to your paycheck. You can place up to $20,500 to a 401(k) in 2022, or as much as $27,000 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 self-employed, there are also retirement plans available, like a One-Participant 401(k) Plan, and you can deduct the savings you put there from your taxable income.
- Tax-Loss Harvesting —
If you lose money on the sale of any stocks, bonds, or options, you can use that loss to reduce your taxable capital gains. This strategy is more common 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 medical expenses your insurance didn't cover, you can deduct those that are greater than 7.5% of your adjusted gross income. You can also make deductions this year for property taxes if you pay early (and if your municipality allows it), pay tuition to an undergraduate, graduate and professional degree courses for your or a child, as well as courses that improve your job skills for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS reports that roughly 95% of married couples choose to file joint tax returns. It's the only way to get certain tax credits and reductions. But, if both spouses earn considerable incomes, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, it may make sense to file separately to meet the 7.5% threshold for unreimbursed medical expenses.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income via charitable donations. Qualifying charities 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," as long as the money are used for charity
- Cemetery companies
- Any government entities, under the condition that the donations are for public use
- Often, 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 start 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 down the road.
If you are at least 70½ years old, you can make what's referred to 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 use an experienced financial planner for your tax planning in Madison County, IL|With the help a financial planner in Madison County, IL, you can not only reduce your tax liability this year, but plan out your taxes into retirement.
Tax Planning for Madison County, IL Business Owners
With diligent tax planning, business owners can keep as much of their profits as possible. Ways to owe less in taxes when tax planning for your Madison County, IL 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.
- 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 may be best to speak to a financial advisor in Madison County, IL about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While you would have to significant sums of money per year, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Only offering raises can result in higher taxes for you. See if your employees would be open to other benefits as part of their compensation, instead of just rewarding them with a raise. 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 having to report them as employee income.
- Put Your Family On the Payroll —
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. If both you and your spouse work for the business, you can double your retirement plan contributions.
- Use 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 ways of deducting those expenses:
- Use the standard mileage rate to deduct 58.5 cents per mile (for the first half of 2022) or 62.5 cents per mile (for the last six months of 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and determine if your deduction would be more than the standard mileage rate
- Look into Carryover Deductions —
You're allowed to carryover some deductions 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. A key benefit of consulting with an experienced Madison County, IL tax planner is that they will work with you and your tax professional to determine if there are ways to improve your long-term financial success.
Other services we offer in Madison County, IL include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Madison County, IL | Correct Capital Wealth Management
At Correct Capital, our Madison County, IL 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 Madison County, IL financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial needs in Madison County, IL, call Correct Capital today at 877-930-4015 or contact us online.
