Tax Planning
Tax Planning in Oakville, MO. Tax liability is how much taxes you pay each year to local, state, and federal governments. While Uncle Sam will always get some portion of your earnings or profits, there are perfectly legal ways to reduce your tax liability. Tax planning is also important for successful retirement planning. At Correct Capital, we work with local Oakville, MO individuals, families, and businesses to find creative and time-tested ways to reduce their tax liability. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out online, or read the article below to see how prudent tax planning can keep more money in your pocket both now and in the future.
Tax Planning for Oakville, MO Individuals and Families
Smart tax planning is essential for individuals and families who want to increase their retirement savings and have extra money for the short-term. Some things to consider when tax planning in Oakville, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar amount 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 more income that shouldn't be taxed than the above, you can itemize your return. The drawback is that doing your taxes takes longer, and you will have to document why you are eligible for the deduction when you send your returns.
- Evaluate How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Contributions to a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Roth IRA contributions 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 being in a higher tax bracket in the future, you can move 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 have a 401(k) plan with your employer, 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, or up to $27,000 if you're 50 or older. For 2023, you can contribute up to $22,500 with an extra $7,500.
If you're have freelance income, there are also retirement plans available, like a One-Participant 401(k) Plan, and you can deduct the funds you put there from your taxable income.
- Tax-Loss Harvesting —
If you lose money on the sale of any stocks, bonds, or options, you can offset the amount of capital gains tax you would have to pay if other securities sold at a profit. This strategy is utilized more with short-term capital gains, as the tax rate is typically 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 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 —
The IRS says that roughly 95% of married couples choose to file joint tax returns. It helps spouses qualify for a higher standard deduction, in addition to a variety of tax credits not available to single filers. But, if both spouses have a high income, filing separately may reduce their combined tax liability. If one spouse received substantial medical treatment in a given year, it may make sense to file separately to meet the 7.5% limit for medical deductions.
- Donate 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 for 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 organizations
- Any government entities, under the condition that the funds are for public use
- Often, a Canadian, Mexican, or Israeli organization, as long as 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 older than 70½, 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 tax-free. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you use an experienced financial planner for your tax planning in Oakville, MO|With the help a financial adviser in Oakville, MO, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for Oakville, MO Businesses
With diligent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Oakville, MO business include:
- Assess How Your Business Is Structured —
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 how much you pay in taxes both as a business and individually.
- Evaluate 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 changed rules for creating and maintaining retirement plans for both small and large employers, so it may be best to consult a financial advisor in Oakville, MO about how those changes affect your tax planning.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While an employer must significant sums of money each year, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can result in higher taxes for you. Talk to your employees about whether or not they would be willing to accept fringe benefits rather than just giving them a higher paycheck. Examples that could help reduce your tax liability are medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also set up accountable plans to reimburse employees for business expenses without counting the reimbursement as income.
- Put Your Family to Work —
If you hire your children, 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 such as a ROTH IRA. If both you and your spouse work for the business, you can double your retirement plan contributions.
- Buy a Company Vehicle —
Depending on the specifics of your business, you and your employees may be able to use a company vehicle and subtract transportation expenses from your taxable profits. There are two different ways of deducting those expenses:
- Use the standard mileage rate to deduct 58.5 cents per mile (for the first half of 2022) or 62.5 cents per mile (for July to December in 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and calculate if your deduction would be more than the standard mileage rate
- Look into Carryover Deductions —
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.
US lawmakers are always making new tax laws for businesses, or adjusting old ones. One advantage of consulting with a knowledgeable Oakville, 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 long-term financial success.
Other services we offer in Oakville, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
- 401(k) For Small Business
Tax Planning in Oakville, MO | Correct Capital Wealth Management
At Correct Capital, our Oakville, MO financial advisors know strong financial health is key to your overall success. That's why we give our I.O.U. promise; you will only hear recommendations that are independent, objective, and unbiased. With tax law always changing, you need a team around you that will help, like your Oakville, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial needs in Oakville, MO, call Correct Capital today at 877-930-4015 or contact us online.
