Tax Planning
Tax Planning in O'Fallon, MO. Tax liability is how much you owe in taxes to local, state, and federal governments. While taxes may be one of the two certainties in life, there are perfectly legal ways you can reduce how much you owe. Tax planning is also important for successful retirement planning. At Correct Capital, we work with local O'Fallon, MO individuals, families, and businesses to find creative and proven ways to reduce their tax liability. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us through our website, or read the article below to discover how judicious tax planning can benefit you.
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Tax Planning for O'Fallon, MO Individuals and Families
Diligent tax planning is essential for individuals and families who want to put more in their retirement accounts and have extra money for the short-term. Some things to consider when tax planning in O'Fallon, MO 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, that flat-rate is:
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 count up each deduction you're eligible for one by one. The downside is that it will take longer to complete your return, and you will have to document why you are eligible for the deduction when you send your returns.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Savings you put into a traditional IRA can be deducted from your taxable income, and the money is not taxed until you withdraw it. Roth IRA contributions cannot be deducted from your taxable income, but the money grows tax free. Your unique situation will determine which type of account is preferable in terms of tax planning. For example, if you expect your taxes to go up down the road, you can transfer funds from a traditional IRA to a Roth IRA to pay taxes on the transfer, while allowing the money to grow tax-free.
If you contribute to a 401(k) plan through your job, you can choose to have earnings deposited into your 401(k) account instead of it going to your paycheck. You can contribute up to $20,500 to a 401(k) in 2022, plus an extra $6,500 if you're 50 or older. For 2023, you can contribute up to $22,500 or $30,000.
If you're have freelance income, you can open up an individual retirement plan, like a One-Participant 401(k) Plan, and you can deduct the money 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. 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 exceed 7.5% of your adjusted gross income. You can also make deductions this year for property taxes if you pay early (and if your municipality allows it), 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 helps couples 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, they may be in a lower tax bracket if they file separately. If one spouse received substantial medical care in a given year, it may make sense to file separately to meet the 7.5% limit for unreimbursed medical expenses.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income via charitable donations. Accepted organizations 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," as long as the money are used for charity
- Cemetery organizations
- Any government entities, as long as the funds are meant to benefit the public
- Often, a Canadian, Mexican, or Israeli organization, as long as the organization meets the criteria for a charity under United States law
If you save money in 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 referred to as a qualified charitable distribution by transferring a maximum of $100,000 a year from a traditional IRA directly to a non-profit organization without having to pay taxes on it. If you are 72 or older, that donation counts as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in O'Fallon, MO|With the assistance of a financial planner in O'Fallon, MO, you can not only reduce your tax liability this year, but understand how to get further benefits once you retire.
Tax Planning for O'Fallon, MO Business Owners
Business owners can use effective tax planning to retain more money in their business. Ways to owe less in taxes when tax planning for your O'Fallon, MO business include:
- Evaluate the Structure of Your Business —
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 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 meet with a financial advisor in O'Fallon, MO about how they may apply to your business.
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 benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher taxes for you. Ask your employees if they would be open to fringe benefits as part of their compensation, instead of just rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or paying for courses that help in their career.
You can also use accountable plans to reimburse employees for certain expenses like travel, meals, or entertainment without counting the reimbursement as income.
- Put Your Family On the Payroll —
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 such as a ROTH IRA. You can double your retirement plan contributions by having your spouse work for the business.
- 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. There are two different ways of deducting those costs:
- Take advantage of 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 the last half of 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.
Congress are always making new tax laws for businesses, or changing old ones. One advantage of consulting with an experienced O'Fallon, MO 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 O'Fallon, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in O'Fallon, MO | Correct Capital Wealth Management
At Correct Capital, our O'Fallon, MO financial advisors know strong financial health is essential to your overall success. That is why we hold ourselves to the fiduciary standard: we are legally and ethically bound to act in your best interest. With tax law always changing, it's important to put a team around you that will help, like your O'Fallon, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial needs in O'Fallon, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
