Tax Planning in Montgomery, AL

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Tax PlanningReduce Your Tax Liability With Correct Capital's Financial Advisors in St. Louis

Tax Planning in Montgomery, AL. Tax liability refers to the amount you owe in taxes to local, state, and federal authorities. Although paying taxes is unavoidable, various lawful strategies can minimize how much you owe. Tax planning is also essential for successful retirement planning. At Correct Capital, we don’t offer tax advice, but we partner with local Montgomery, AL residents, families, and business owners to explore effective and tried-and-true ways to lower their tax obligations. 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, connect with us online, or keep reading to learn how proactive tax planning can benefit you.



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Tax Planning for Montgomery, AL Individuals and Families

Smart tax planning can help individuals and families increase their retirement savings and offer them more money for both the present and the future. Here are some key points when tax planning in Montgomery, AL:

  • Standard Deduction vs. Itemizing —

    The standard deduction is a fixed 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 trade-off is that itemizing takes more time, as you need to provide evidence for each deduction. A financial planner in Montgomery, AL can help determine whether claiming the standard or itemized deduction is more suitable.

  • Review Your Retirement Accounts —

    Roth IRAs and Traditional IRAs both provide tax advantages, though in different ways. Contributions to a traditional IRA may be fully or partially deductible, and taxes are only applied upon withdrawal. 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. For example, if you anticipate higher taxes in the future, you might consider transferring money from a traditional IRA to a Roth IRA—a process known as a Roth conversion—paying taxes now but securing future tax-free growth.

    If you have a 401(k) plan with your employer, you can set aside income from your paycheck, placing it straight into your 401(k). The 401(k) contribution limit for 2024 is $23,000, along with an additional $7,500 for individuals 50 or older.

    For self-employed individuals or those with freelance income, individual retirement plans are also available. Options include a Simplified Employee Pension (SEP) IRA or a One-Participant 401(k) Plan, which allow you to deduct your contributions.

  • Tax-Loss Harvesting

    Selling securities at a loss allows you to reduce the capital gains tax on profitable sales. Tax-loss harvesting is especially useful for short-term gains, where tax rates are higher than for long-term gains. Each year, up to $3,000 in capital losses can be deducted, and extra losses can be carried forward to future years.

  • Consider Paying Next Year's Bills Now —

    Medical expenses not reimbursed by insurance can be deducted if they exceed 7.5% of your AGI. 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 —

    Approximately 95% of married couples choose to file jointly, which is the only way to qualify for certain tax credits and deductions. However, if one spouse is a higher earner, filing separately might place them in a lower tax bracket. In situations where one spouse has substantial medical expenses, separate filing can help reach the medical deduction threshold.

  • Make Charitable Donations —

    Donating to eligible organizations allows you to deduct as much as 60% of your adjusted gross income. According to IRS Publication 526, qualifying organizations include:

    • Non-profit organizations focused on religion, science, education, or preventing cruelty to animals and children
    • Veterans' organizations
    • Domestic fraternal organizations operating under a "lodge system" if funds go to charity
    • Non-profits or companies associated with cemeteries
    • Federal, state, local, or Native government entities, provided funds are for public purposes
    • Canadian, Mexican, or Israeli organizations, provided they meet U.S. charity qualifications

    *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.

    At age 70½ or older, you can make a qualified charitable distribution by transferring up to $105,000 each year tax-free from a traditional IRA directly to a charity. At age 73 and over, this donation meets the requirements for your required minimum distribution and could lessen both future required distributions and your tax bill.

When you choose an experienced financial adviser for tax planning in Montgomery, AL, you’re able to reduce current tax liability while planning for taxes well into 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 Montgomery, AL Individuals and Families

Smart tax planning is vital for your family’s overall financial security. However, mistakes in tax planning can lead to paying more in taxes than necessary or missing out on potential savings. Here are a few frequent tax planning mistakes and ways Correct Capital can assist in preventing them:

  • Not Maximizing Retirement Contributions —

    When you don’t contribute the maximum allowable to tax-advantaged retirement accounts like Traditional IRAs, Roth IRAs, or 401(k)s, you may miss out on valuable tax deductions and long-term growth.

    How Correct Capital Helps: Our team assesses your finances to confirm you’re maximizing contributions, minimizing your tax burden while enhancing your retirement savings.

  • Overlooking Available Tax Credits and Deductions —

    Valuable tax credits and deductions—like the Earned Income Tax Credit, Child Tax Credit, and deductions for medical and educational expenses—are often overlooked by individuals.

    How Correct Capital Helps: Our team checks your tax return for any missed credits and deductions, with the goal of increasing your refund or decreasing your tax bill.

  • Poor Record-Keeping —

    Disorganized financial records can lead to missed deductions and complications when filing taxes. Without accurate documentation, you might struggle to substantiate 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: Our team provides insight on tax-efficient investment choices, assisting you in minimizing taxes on dividends, interest, and capital gains through strategic asset selection.

  • Failing to Plan for Life Changes —

    Significant life changes, such as marriage, divorce, becoming a parent, or purchasing a home, can greatly affect your tax obligations. Ignoring these life events may cause surprise 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 —

    If you earn income not subject to withholding, such as freelance or investment income, estimated tax payments may be necessary. Without making these payments, you could face fines and interest charges.

    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 offer guidance on the benefits of HSAs and FSAs, assessing whether they suit your circumstances and helping you allocate pre-tax dollars for healthcare expenses to lower 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

    Withholding too much or too little tax from your paycheck often leads to surprises at tax time, like large refunds or owing taxes.

    How Correct Capital Helps: We work with you to adjust your withholding allowances for improved cash flow and reduced surprises during tax season.

  • Missing Opportunities for Charitable Contributions —

    If you don’t track or plan your charitable contributions, you could lose valuable deduction opportunities.

    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 Montgomery, AL Business Owners

Business owners in Montgomery, AL can use strategic tax planning to keep more revenue within their business. Here are some factors to consider for tax planning in your Montgomery, AL business:

  • Review the Structure of Your Business —

    The structure of your business impacts tax planning and should be carefully considered. Structuring your business as an LLC, sole proprietorship, partnership, or S or C corporation will affect both corporate and individual 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 —

    Depending on your business activities in Montgomery, AL, both you and your employees could use a company vehicle and deduct the associated costs. There are two options for claiming this deduction:

    • Take the standard mileage deduction of 67 cents per mile for gas and electric vehicles; or
    • Keep a record of actual expenses, including maintenance, registration, and gas, to see if this results in a larger deduction than the standard mileage rate.
  • Consider Fringe Benefits For Your Employees —

    Raising employee salaries may lead to increased employment tax costs. See if employees are open to receiving fringe benefits as part of their pay package rather than a higher paycheck. Some options that may help lower your tax costs include health insurance, group life insurance, childcare assistance, travel reimbursements, meal programs, paid family leave, and education reimbursements.

    You can implement accountable plans to cover certain employee expenses, such as travel, meals, or entertainment, without reporting them as income.

  • Look into Carryover Deductions —

    If certain deductions aren’t usable this year, you may be able to apply them in a different tax year. These may include deductions such as home office expenses, net operating losses, business credits, and capital losses.

Tax laws for businesses are constantly evolving. Partnering with a professional tax planner in Montgomery, AL means they work with you and your tax expert to identify strategies for enhancing long-term financial outcomes.

Common Tax Planning Mistakes for Montgomery, AL 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. Here’s a look at frequent tax pitfalls and how Correct Capital can help businesses steer clear of them.

  • Not Paying Estimated Quarterly Taxes —

    Some businesses miss or underpay estimated quarterly taxes, which often leads to IRS penalties and added interest. Small businesses, freelancers, and companies with fluctuating income are particularly susceptible to this.

    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. Plans like 401(k)s, SEP IRAs, and Solo 401(k)s can provide substantial tax benefits for both owners and employees.

    How Correct Capital Helps: We work with businesses to set up and maximize retirement plans, which reduce taxes while also helping attract and retain talent.

  • Not Planning for Profitability and Cash Flow —

    Some businesses only focus on minimizing their current tax bill, neglecting long-term growth and profitability. This short-term focus can result in missed chances for strategic investments or tax-efficient growth strategies.

    How Correct Capital Helps: We offer comprehensive tax planning that extends beyond immediate deductions, helping businesses plan for growth, reinvest profits, and manage cash flow effectively.

  • Neglecting Exit and Estate Planning —

    Business owners often fail to create a succession plan to address the financial aspects of selling their business. Often focused on day-to-day business, owners can overlook how to handle proceeds from a sale to minimize taxes. Additionally, without estate planning, owners may miss opportunities to ensure beneficiaries and loved ones are taken care of.

    How Correct Capital Helps: We provide assistance in exit planning, helping business owners determine where to allocate sale proceeds. We focus on defining the purpose of these funds and addressing them from an estate planning perspective, ensuring beneficiaries are considered and taxes are minimized through careful planning.

Tax Planning| Retirement Planners | Financial Advisor Near Me

Tax Planning in Montgomery, AL | Correct Capital Wealth Management

Our Montgomery, AL financial advisors and tax planners at Correct Capital know that your financial security—whether for family or business—is crucial now and in the long term. 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 Montgomery, AL financial advisor, tax specialist, and attorney. For assistance with tax planning, retirement planning, or other financial needs in Montgomery, AL, reach out to Correct Capital at 877-930-4015 or contact us online.


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