Tax Planning in O'Fallon, IL

Tax PlanningReduce Your Tax Liability With Correct Capital's Financial Advisors in O'Fallon, IL

Tax Planning in O'Fallon, IL. Tax liability refers to how much you owe in taxes to local, state, and federal governments. Even though Uncle Sam will always get some percentage of your earnings or profits, there are perfectly legal ways to reduce your tax liability. Tax planning is also essential for successful retirement planning. At Correct Capital, we work with local O'Fallon, IL individuals, families, and businesses to find creative and time-tested strategies for reducing their tax burden. Speak to Correct Capital's financial planners and fiduciary advisors today at 877-930-4015, contact us through our website, or read on to learn how prudent tax planning can keep more money in your account both now and in the future.

Tax Planning for O'Fallon, IL Individuals and Families

Diligent tax planning can help individuals and families put more in their retirement accounts and have extra money for the short-term. Some things to take advantage of when tax planning in O'Fallon, IL include:

• Standard Deduction vs. Itemizing —

  The standard deduction is flat figure that reduces the amount of income you are taxed on. 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 it will take longer to fill out your return, and you have to prove each deduction.

• Review Your Retirement Accounts —

  Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Contributions to a traditional IRA can be deducted from your taxable income, and you pay taxes on it when you withdraw it. Money 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 in terms of tax planning. For instance, if you expect your taxes to go up down the road, you can convert money 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 contribute up to $20,500 to a 401(k) in 2022, or as much as $27,000 if you're at least 50 years old. 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 savings 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. Tax-loss harvesting 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 down the road.

• Consider Paying Next Year's Bills Now —

  If you have medical expenses your insurance didn't cover, you can deduct those that exceed 7.5% of your adjusted gross income. Paying property taxes early can also help you reduce your taxable income, and you can pay for a kid'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 file jointly. It's the only way to get certain tax credits and reductions. But, if both spouses are higher-earning individuals, 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% limit for medical deductions.

• Make Charitable Donations —

  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 funds are used for charity
  • Cemetery companies
  • Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the donations are meant to benefit the public
  • Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. law

  If you open a Donor-Advised Fund, you can contribute a bulk 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 charity tax-free. 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 O'Fallon, IL|With the assistance of a financial planner in O'Fallon, IL, they can help put more money in your pocket now while also setting you up for a financially secure future.

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Tax Planning for O'Fallon, IL Businesses

Business owners can use effective tax planning to retain more money in their business. Some things to consider when tax planning for your O'Fallon, IL business include:

• Evaluate How Your Business Is Structured —

  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 affect how much you pay in taxes both as a business and personally.

• Evaluate the Retirement Plans You Offer Employees —

  Offering retirement plans not only attracts and retains talent, but it also allows you to deduct contributions. The "SECURE" Act of 2019 changed rules for creating and maintaining retirement plans for both small and large employers, so it's likely in your best interest to speak to a financial advisor in O'Fallon, IL about how they may apply to your business.

  For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While a business owner must significant sums of money annually, the tax benefits are high.

• Consider Other Benefits For Your Employees —

  Increasing your employees' wages can result in higher employment tax costs. See if your employees 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 continuing education reimbursement.

  You can also set up accountable plans to reimburse employees for certain expenses like travel, meals, or entertainment without counting the reimbursement as income.

• Have Your Family Work For The Business —

  Your kids can work for you tax-free on income up to $12,000, and you can help them begin to save in a vehicle like a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.

• Buy 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 half of 2022) or 62.5 cents per mile (for the last half of 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
• Look into Tax Loss Carryforward —

  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.

Tax laws for businesses are always changing. A key benefit of consulting with an experienced O'Fallon, IL tax planner is that they will work with you and your tax professional to discover if there are ways to improve your long-term financial success.

Other services we offer in O'Fallon, IL include:

• Succession Planning
• Fiduciary Financial Advisor
• Company 401(k) Plans
• ESOP Advisor
• Self-Employed Retirement Plans
• 401(k) For Small Business

Tax Planning in O'Fallon, IL | Correct Capital Wealth Management

At Correct Capital, our O'Fallon, IL tax planners know how important the financial health of your family or business is, both now and in the future. 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 O'Fallon, IL financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial services in O'Fallon, IL, call Correct Capital today at 877-930-4015 or contact us through our website.

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