Tax Planning
Tax Planning in Norfolk, VA. Tax liability refers to the amount you owe in taxes to local, state, and federal authorities. While it’s inevitable that a part of your earnings or profits goes to taxes, there are numerous legal strategies to lessen your tax burden. Tax planning is also essential for successful retirement planning. At Correct Capital, we don’t give tax advice; however, we work alongside local Norfolk, VA residents, families, and business owners to explore effective and tried-and-true ways to decrease their tax burden. For instance, we might advise an individual to maximize deductible contributions to their retirement plan, which can help lessen tax costs. Reach out to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read on to see how effective tax planning can make a difference.
Tax Planning for Norfolk, VA Individuals and Families
Proactive tax planning can help individuals and families build their retirement savings and offer them more money for both now and years to come. Here are some key points when tax planning in Norfolk, VA:
- Standard Deduction vs. Itemizing —
The standard deduction is a automatic amount that you can deduct from your taxable income without additional documentation. 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. However, itemizing requires more time and documentation to verify each deduction. A financial planner in Norfolk, VA can work with you to decide whether using the standard deduction or itemizing is more beneficial.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both present unique tax benefits. A traditional IRA allows for contributions that may be deductible, with taxes deferred until you withdraw funds. Roth IRA contributions, in contrast, are not deductible but allow for tax-free growth on your investments. The best option depends on your individual financial picture and tax outlook. If you expect future tax rates to increase, a Roth conversion, or moving funds from a traditional IRA to a Roth IRA, might be wise to lock in tax-free growth while paying taxes upfront.
If you have a 401(k) plan with your employer, it's possible to defer part of your salary directly into your 401(k) account. The 401(k) contribution limit for 2024 is $23,000, along with an additional $7,500 for individuals 50 or older.
If you're self-employed or have freelance income, you may also establish a retirement plan that suits your situation. 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 —
By selling securities at a loss, you can offset capital gains taxes owed on gains from other investments. This approach is particularly beneficial for short-term capital gains, which are often taxed at higher rates than long-term gains. You can deduct up to $3,000 in capital losses each year, with any remaining losses rolled over into future tax years.
- Consider Paying Next Year's Bills Now —
For unreimbursed medical expenses, you can deduct costs that surpass 7.5% of your adjusted gross income. Additionally, you might consider paying property taxes early (if allowed by your municipality), prepaying a child’s tuition, or covering your own career-enhancing classes 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. Separate filing may also make sense if one partner has considerable medical costs, making it easier to meet the 7.5% medical deduction limit.
- 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:
- Religious, scientific, educational, or anti-cruelty non-profit organizations for animals and children
- Organizations dedicated to veterans
- A domestic fraternal organization that operates under a "lodge system" as long as the funds are directed toward charity
- Non-profits or companies associated with cemeteries
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as funds are for public use
- Canadian, Mexican, or Israeli organizations, provided they meet U.S. charity qualifications
*According to IRS Publication 526 (2023), Charitable Contributions
By opening a Donor-Advised Fund, you can make a large contribution now for an immediate tax deduction and recommend how the funds are allocated in the future.
If you are over 70½, you can make a qualified charitable distribution by transferring as much as $105,000 a year from a traditional IRA directly to a charity, tax-free. 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 Norfolk, VA, 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 Norfolk, VA Individuals and Families
Good tax planning plays an essential role in ensuring your family’s financial well-being. Unfortunately, errors in tax planning often cause people to owe more or miss savings opportunities. Here are a few frequent tax planning mistakes and ways Correct Capital can assist in preventing them:
- Not Maximizing Retirement Contributions —
By not maximizing contributions to retirement accounts like Traditional IRAs, Roth IRAs, or 401(k)s, you risk losing out on tax deductions and long-term growth opportunities.
How Correct Capital Helps: We evaluate your financial situation to ensure you’re contributing as much as feasible, which can reduce taxable income while building a strong retirement foundation.
- Overlooking Available Tax Credits and Deductions —
Many people miss out on important tax credits and deductions, such as the Earned Income Tax Credit, Child Tax Credit, or deductions for education and medical expenses.
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 —
A lack of organized financial records may result in missed deductions and complications at tax filing time, and without the right documents, you may have trouble supporting claims if audited.
How Correct Capital Helps: Our team helps you establish organized record-keeping systems and locate required documents, making sure everything is available for tax filing or in case of an audit.
- Ignoring Tax-Efficient Investment Strategies —
Overlooking the tax impact of investment decisions can diminish your returns. This may include neglecting asset location strategies or failing to harvest tax losses.
How Correct Capital Helps: We offer guidance on tax-efficient investing, helping you select suitable investment vehicles and strategies to reduce taxes on dividends, interest, and capital gains.
- Failing to Plan for Life Changes —
Life events, including marriage, divorce, welcoming a child, or buying a property, often alter your tax landscape considerably. Neglecting to adjust for these changes can lead to unexpected 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. Failure to do so can lead to penalties and interest.
How Correct Capital Helps: Our team assists in creating a cash reserve plan to ensure you meet estimated tax obligations, reducing the risk of penalties.
- 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: Our advisors explain the advantages of HSAs and FSAs and determine if they’re right for you, helping you set aside pre-tax funds for medical costs to reduce taxes.
- Overlooking Education Savings Plans —
By not using options like 529 plans, you could miss out on tax benefits that aid in saving for a child’s education.
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 —
Incorrect tax withholding—either too much or too little—may result in a big refund or an unexpected tax bill.
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 Norfolk, VA Business Owners
Business owners in Norfolk, VA can utilize tax planning strategies to maximize retained earnings in their business. Consider these points when tax planning for your Norfolk, VA 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.
If you’re a high-earning business owner with high-income employees, a Cash Balance Pension Plan could be advantageous, though it requires large contributions.
- Have Your Family Work For The Business —
Bringing family into the business offers tax perks, such as allowing children to work tax-free up to $14,600, and they can even start contributing to a ROTH IRA. Having your spouse on the payroll can let you double the amount you contribute to retirement.
- Use a Company Vehicle —
Depending on your business activities in Norfolk, VA, both you and your employees could use a company vehicle and deduct the associated costs. This deduction can be made in two ways:
- Deduct 67 cents per mile using the standard mileage rate, which applies to gas and electric vehicles alike; or
- Track your actual expenses, such as maintenance, registration fees, and fuel, to determine if this amount exceeds the standard mileage rate deduction.
- Consider Fringe Benefits For Your Employees —
Raising employee salaries may lead to increased employment tax costs. Explore the possibility of offering fringe benefits instead of wage raises. 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 —
When some deductions are unavailable this year, they may be eligible for carryover into future years. These may include deductions such as home office expenses, net operating losses, business credits, and capital losses.
Business tax laws change frequently. One advantage of working with a professional Norfolk, VA tax planner is that they will collaborate with you and your tax professional to find ways to improve long-term financial success.
Common Tax Planning Mistakes for Norfolk, VA Businesses
Effective tax planning allows businesses of all sizes to reduce tax liabilities and increase profitability. Yet, numerous businesses make frequent tax errors that result in increased tax bills, overlooked deductions, and potential penalties. Below are some of the most common tax planning errors businesses make and how Correct Capital can help you avoid 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 companies miss the opportunity to use retirement contributions to lower their 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 assist businesses in establishing retirement plans that cut taxes and appeal to prospective and current employees.
- Not Planning for Profitability and Cash Flow —
Some businesses only focus on minimizing their current tax bill, neglecting long-term growth and profitability. Such a narrow focus may cause missed opportunities for reinvestment or tax-efficient growth.
How Correct Capital Helps: Our team provides tax planning that goes beyond short-term cuts, supporting businesses in planning for growth, reinvesting, and handling cash flow efficiently.
- Neglecting Exit and Estate Planning —
Many business owners don’t establish a succession plan to handle the financial details involved in selling their business. Often focused on day-to-day business, owners can overlook how to handle proceeds from a sale to minimize taxes. Without proper estate planning, owners might not fully address their loved ones’ and beneficiaries’ financial security.
How Correct Capital Helps: Our team supports business owners in exit planning, helping them decide how to manage the proceeds from a sale. Our approach involves identifying the purpose of the funds and applying estate planning strategies, which consider beneficiaries and minimize taxes.
Other services we offer in Norfolk, VA include:
- Family Wealth Planning
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
Tax Planning in Norfolk, VA | Correct Capital Wealth Management
Correct Capital’s financial advisors and tax planners in Norfolk, VA recognize the importance of financial well-being for your family or business, today and into the future. That’s why we adhere to the fiduciary standard and our I.O.U. promise: all the advice we offer is independent, objective, and unbiased. With tax laws constantly evolving, it’s essential to have a strong team in place, including your Norfolk, VA financial advisor, tax professional, and attorney. For assistance with tax planning, retirement planning, or other financial needs in Norfolk, VA, reach out to Correct Capital at 877-930-4015 or contact us online.
