Tax Planning
Tax Planning in Manchester, MO. Tax liability refers to how much you owe in taxes to local, state, and federal authorities. Even though taxes may be one of the two certainties in life, The IRS allows for several ways to reduce your tax liability. Tax planning is also important for successful retirement planning. At Correct Capital, we partner with local Manchester, MO individuals, families, and businesses to find creative and proven ways to reduce their tax burden. Call Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, reach out through our website, or read the article below to see how prudent tax planning can keep more money in your account both now and down the road.
Tax Planning for Manchester, MO 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. Ways to reduce how much you owe when tax planning in Manchester, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount that you can deduct from your taxable income. 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 count up each deduction you're eligible for individually. The downside is that it will take longer to fill out your return, 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 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. Roth IRA contributions are not deductible, but you will not be taxed on the withdrawal, as long as you are over 59 1/2 and have had the account for at least five years. Your age, income, and other factors will determine whether a Traditional or Roth IRA is preferable in terms of tax planning. For example, if you anticipate have more tax liability in the future, you can move money from a traditional IRA to a Roth IRA to pay taxes on the transfer, while allowing the money to grow tax-free.
If you contribute to a 401(k) plan through your job, you can choose to have money 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 50 or older. For 2023, you can contribute as much as $22,500 with an extra $7,500.
If you're self-employed, you can open up an individual retirement plan, like a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you sell securities 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 you may be able to deduct higher losses in the future.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can deduct 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 for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
More than 9 out of 10 married couples choose to file joint tax returns. 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 has a lot of medical expenses, it may make sense to file separately to qualify for the 7.5% threshold for unreimbursed medical expenses.
- Contribute to Charity —
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 dedicated to the prevention of cruelty to animals and children
- Veterans' organizations
- A domestic fraternal organization operating under the "lodge system," under the condition that the donations are used for charity
- Cemetery organizations
- Any government entities, 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 meets the criteria for a charity under United States law
If you open 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 at least 70½ years old, 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 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 an experienced financial adviser for your tax planning in Manchester, MO|With the assistance of a financial adviser in Manchester, MO, they can help put more money in your pocket now while also setting you up for a financially secure future.
Tax Planning for Manchester, MO Businesses
Business owners can use smart tax planning to keep more money in their business. Some things to consider when tax planning for your Manchester, MO business include:
- Review 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 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 offers new benefits for employers who offer certain retirement plans, so it's likely in your best interest to meet with a financial advisor in Manchester, MO about how they may apply to your business.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While you must significant sums of money each year, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher taxes for you. Ask your employees if they would be willing to accept fringe benefits as part of their compensation, instead of just giving them more money. Examples that could help reduce your tax liability are medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, more paid time off, or paying for career-boosting courses.
You can also use accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without having to report them as employee income.
- Put Your Family to Work —
Children can work for you tax-free on income up to $12,000, and you can help them begin to save in a vehicle such as a ROTH IRA. If your spouse works in 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 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 July to December in 2022); or
- Document your actual expenses, like maintenance, registration fees, and gas, and calculate if your deduction would be more than the standard mileage rate
- Consider Tax Loss Carryforward —
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.
Tax laws for businesses are always in flux. A key benefit of working with an experienced Manchester, MO tax planner is that they will work with you and the person who prepares your taxes to determine 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
- 401(k) For Small Business
- Small Business Retirement Plans
Tax Planning in Manchester, MO | Correct Capital Wealth Management
At Correct Capital, our Manchester, 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 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 Manchester, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial services in Manchester, MO, call Correct Capital today at 877-930-4015 or contact us online.
