Tax Planning
Tax Planning in Manchester, MO. Tax liability is how much you owe in taxes to local, state, and federal governments. Even though taxes may be one of the two certainties in life, there are perfectly legal ways you can reduce how much you owe. Tax planning is also key to planning the retirement of your dreams. At Correct Capital, we work with Manchester, MO individuals, families, and businesses in the Manchester, MO area to find creative and proven ways to reduce their tax liability. Speak to Correct Capital's financial planners and fiduciary advisors today at 877-930-4015, contact us through our website, or read on to discover how judicious tax planning can keep more money in your account both now and in the future.
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Tax Planning for Manchester, MO Individuals and Families
Prudent tax planning can help individuals and families increase their retirement savings and afford them more money for both now and the near future. Some things to take advantage of when tax planning in Manchester, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount that ensures all tax payers have at least some income that won't be taxed. 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 your deductible income is more than the above, you can count up each deduction you're eligible for individually. The downside is that filing will be more complicated, and you will have to document why you are eligible for the deduction when you send your returns.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Money you put into a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Savings put into a Roth IRA are not deductible, but the money grows tax free. Your unique situation 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 convert savings from a traditional IRA to a Roth IRA to pay taxes on the transfer, and enjoy tax-free withdrawals when you need the money in retirement.
If you contribute to a 401(k) plan with your employer, you can choose to have earnings 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 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 your contributions there.
- 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. 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 you may be able to deduct higher losses in the future.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, you can deduct those that exceed 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 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 spouses qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. However, if both spouses are higher-earning individuals, they may be in a lower tax bracket if they file separately. If one spouse received considerable medical treatment in a given year, it may make sense to file separately to meet 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 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," as long as the money are used for charity
- Cemetery companies
- 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 would have been organized as a charity under U.S. law
If you start 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 in the future.
If you are over 70½, 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 without having to pay taxes on it. If you are 72 or older, that donation qualifies as your required minimum distribution.
When you use a knowledgeable financial adviser for your tax planning in Manchester, MO|With the assistance of a financial planner in Manchester, MO, they can help put more money in your pocket this year while also setting you up for a financially secure retirement.
Tax Planning for Manchester, MO Businesses
Business owners can use effective tax planning to keep more money in their business. Ways to reduce your tax liability when tax planning for your Manchester, MO business include:
- Assess How Your Business Is Structured —
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 affect 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 offers new benefits for employers who offer certain retirement plans, so it's likely in your best interest to consult a financial advisor in Manchester, 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 must considerable amounts of money each year, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages 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 higher paycheck. Examples that could help reduce your tax liability are medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or paying for career-boosting courses.
You can also set up accountable plans to reimburse employees for certain expenses like travel, meals, or entertainment without having to report them as employee income.
- Have Your Family Work For The Business —
If you get your children on the payroll, they do not have to pay taxes on their first $12,000 in income, and you can help them begin to save in a vehicle like a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- Use a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and subtract transportation costs from your taxable profits. You can make the deduction in two ways:
- 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 the last six months of 2022); or
- Document your actual expenses, like maintenance, registration fees, and gas, and determine if your deduction would be more than the standard mileage rate
- Consider Tax Loss Carryover —
If you're not able to make certain deductions this year, you may be able to carry them over into another year. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Congress are always making new tax laws for businesses, or changing old ones. A key benefit of consulting with an experienced Manchester, MO tax planner is that they will work with you and the person who prepares your taxes to discover if there are ways to strengthen your personal and business financial success.
Other services we offer in Manchester, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Manchester, MO | Correct Capital Wealth Management
At Correct Capital, our Manchester, MO tax planners know strong financial health is key to your overall success. 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, it's important to put a team around you that will help, like your Manchester, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Manchester, MO, call Correct Capital today at 877-930-4015 or contact us online.
