Tax Planning
Tax Planning in Millstadt, IL. Tax liability is how much taxes you will need to pay to local, state, and federal entities. While taxes may be one of the two certainties in life, The IRS allows for several ways you can reduce how much you owe. Tax planning is also key for successful retirement planning. At Correct Capital, we partner with Millstadt, IL individuals, families, and businesses in the Millstadt, IL area to find creative and proven ways to reduce how much they owe. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out through our website, or read the article below to see how diligent tax planning can benefit you.
Tax Planning for Millstadt, IL Individuals and Families
Diligent tax planning is essential for individuals and families who want to increase their retirement savings and afford them more money for both now and the near future. Ways to reduce how much you owe when tax planning in Millstadt, IL include:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked figure that ensures all tax payers have at least some income that won't be taxed. 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 itemize your return. The disadvantage is that filing will be more complicated, and you have to prove each deduction.
- Evaluate How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Savings you put into a traditional IRA can be deducted from your taxable income, and the money is not taxed until you withdraw it. Savings put into a Roth IRA are not deductible, but you will not be taxed on the withdrawal, as long certain requirements are met. Your unique situation 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 convert savings from a traditional IRA to a Roth IRA to pay taxes on the conversation, while allowing the money to grow tax-free.
If you contribute to 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 place 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 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 the savings you put there from your taxable income.
- Tax-Loss Harvesting —
If you sell securities at a loss, 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 typically 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 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. Paying property taxes early can also lead to deductions, and you can 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 —
More than 9 out of 10 married couples choose to file joint tax returns. It's the only way to get certain tax credits and reductions. However, if both spouses are higher-earning individuals, they may be in a lower tax bracket if they file separately. 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. Qualifying charities are:
- 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 money are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, 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 contribute a large amount now for an immediate tax reduction, and recommend how the funds are distributed over the years that follow.
If you are at least 70½ years of age, you can make what's referred to as a qualified charitable distribution by transferring no more than $100,000 a year from a traditional IRA directly to a charity without having to pay taxes on it. If you are 72 or older, that donation qualifies as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in Millstadt, IL|With the help a financial planner in Millstadt, IL, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for Millstadt, IL Business Owners
With diligent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Millstadt, IL business include:
- Review the Structure of Your Business —
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 offers new benefits for employers who offer 401(k)s and SIMPLE IRAs with automatic enrollment, so it may be best to speak to a financial advisor in Millstadt, IL about how those changes affect your tax planning.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While you would need to significant amounts of money annually, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Merely offering more money can result in higher taxes for you. Ask your employees if they would be willing to accept 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, help with childcare expenses, transportation reimbursement, meals, more paid time off, or paying for courses that help in their career.
You can also set up accountable plans to pay employees back for business expenses without counting the reimbursement as 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 kick-start their retirement savings through an account like a ROTH IRA. You can double your retirement plan contributions 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. You can make the deduction in two ways:
- Use the standard mileage rate to deduct 58.5 cents per mile (for the first 6 months of 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 if your deduction would be more than the standard mileage rate
- Consider 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.
Congress are always making new tax laws for businesses, or adjusting old ones. One benefit of working with a professional Millstadt, IL tax planner is that they will work with you and the person who prepares your taxes to identify if there are ways to improve your personal and business financial success.
Other services we offer in Millstadt, IL 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 Millstadt, IL | Correct Capital Wealth Management
At Correct Capital, our Millstadt, IL 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 Millstadt, IL financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial needs in Millstadt, IL, call Correct Capital today at 877-930-4015 or contact us online.
