Reduce Your Tax Liability With Correct Capital's Financial Advisors in O'Fallon, MO
Tax Planning in O'Fallon, MO. Tax liability is how much taxes you pay each year to local, state, and federal entities. While taxes may be one of the two certainties in life, there are perfectly legal ways to reduce how much money you have to pay. Tax planning is also key to planning the golden years of your dreams. At Correct Capital, we partner with O'Fallon, MO individuals, families, and businesses in the O'Fallon, MO area to find creative and proven ways to reduce how much they owe. Call Correct Capital's financial planners and fiduciary advisors today at 314-930-401(k), reach out through our website, or read on to discover how judicious tax planning can keep more money in your account both now and in the future.
Tax Planning for O'Fallon, MO Individuals and Families
Smart tax planning can help individuals and families increase their retirement savings and afford them more money for both now and the near future. Ways to reduce your tax liability when tax planning in O'Fallon, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked figure that you can deduct from your taxable income. In 2022 and 2023, that flat-rate is:
- $12,950 for single filers
- $25,900 for married, filing jointly
- $12,950 for married, filing separately
- $19,400 for head of household
- $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 individually. The downside is that filing will be more complicated, 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 do not affect your taxable income, but you will not be taxed on the withdrawal, as long as you are over 59 1/2 and have had the account for at least five years. Your unique situation will determine what may be better for you in terms of tax planning. For example, if you anticipate being in a higher tax bracket in the future, you can transfer 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 contribute to a 401(k) plan with your employer, 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, or up to $27,000 if you're at least 50 years old. For 2023, you can deposit as much as $22,500 with an extra $7,500.
If you're self-employed, you can open up an individual retirement plan, such as a One-Participant 401(k) Plan, and you can deduct your contributions there.
- 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 be liable for 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. 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 unreimbursed medical expenses, you can deduct those that exceed 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 couples qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. However, if both spouses earn considerable incomes, filing separately may reduce their combined tax liability. If one spouse received considerable medical treatment in a given year, it may make sense to file separately to qualify for the 7.5% threshold for medical deductions.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. 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," as long as the funds are used for charity
- Cemetery companies
- Any government entities, under the condition that the funds are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, as long as the organization meets the criteria for a charity under United States law
If you deposit 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 over 70½, you can make what's referred to as a qualified charitable distribution by transferring up to $100,000 a year from a traditional IRA directly to a charity without having to pay taxes on it. If you are 72 or older, that donation counts as your required minimum distribution.
When you use an experienced financial planner for your tax planning in O'Fallon, MO|With the assistance of a financial adviser in O'Fallon, MO, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for O'Fallon, MO Businesses
Business owners can use smart tax planning to keep more money in their business. Some things to consider 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.
- Review Your Employees' Employer-Sponsored Retirement Plans —
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's recommended 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 an employer would have to considerable sums of money each year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can lead to higher employment tax costs. Ask your employees if they would be willing to accept other benefits as part of their compensation, instead of just giving them a higher paycheck. Common fringe benefits include medical insurance, group life insurance, help with childcare expenses, 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.
- Have Your Family Work For The Business —
If you hire your children, they do not have to pay taxes on their first $12,000 in income, and you can help them begin to save in a vehicle such as a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- Have a Company Vehicle —
If you and your employees need to drive as part of the normal course of your business, you can subtract transportation expenses from your taxable income. You can make the deduction in two ways:
- Use the standard mileage rate to deduct 58.5 cents per mile (for January to June in 2022) or 62.5 cents per mile (for July to December in 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.
Congress are always making new tax laws for businesses, or changing old ones. A key advantage of working with a professional O'Fallon, 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 O'Fallon, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
- 401(k) For Small Business
- Small Business Retirement Plans
- Social Security Consultants Near Me
- Retirement Calculator
Tax Planning in O'Fallon, MO | Correct Capital Wealth Management
At Correct Capital, our O'Fallon, 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 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 314-930-401(k) or contact us online.