Tax Planning
Tax Planning in Olivette, MO. Tax liability is how much taxes you pay each year to local, state, and federal governments. Even though 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 important to planning the retirement of your dreams. At Correct Capital, we work with Olivette, MO individuals, families, and businesses in the Olivette, MO area to find creative and proven ways to reduce how much they owe. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out through our website, or read the article below to discover how prudent tax planning can keep more money in your account both now and down the road.
Tax Planning for Olivette, 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. Some things to take advantage of when tax planning in Olivette, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar figure that you can deduct from your taxable income. 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 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 Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Savings you put into a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Savings put into a Roth IRA do not affect your taxable income, but the money grows tax free. Your age, income, and other factors will determine what may be better for you in terms of tax planning. For instance, if you anticipate being in a higher tax bracket 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 work, 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 as much as $27,000 if you're at least 50 years old. For 2023, you can deposit up to $22,500 or $30,000.
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 the savings you put there from your taxable income.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, 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 additional losses can be carried over into future years.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, 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 for a kid's tuition or for career-boosting classes for you early in order to qualify 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, in addition to a variety of tax credits not available to single filers. But, if both spouses are higher-earning individuals, 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 be preferable to file separately to qualify for 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 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 funds are used for charity
- Cemetery companies
- Any government entities, as long as the donations 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 save money in a Donor-Advised Fund, you can deduct a bulk amount now, while still being able to wait to decide how the funds will get distributed in the future.
If you are older than 70½, you can make what's called a qualified charitable distribution by transferring no more than $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 Olivette, MO|With the assistance of a financial adviser in Olivette, MO, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for Olivette, 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 Olivette, MO business include:
- Review the Structure of Your Business —
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 have consequences for both your corporate and your individual tax rate.
- Evaluate 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 offers new benefits for employers who offer certain retirement plans, so it may be best to speak to a financial advisor in Olivette, 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 a business owner would need to considerable amounts of money each year, the tax benefits are high.
- 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 open to fringe benefits as part of their compensation, instead of just giving them a raise. Common fringe benefits include medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, more paid time off, or continuing education reimbursement.
You can also use accountable plans to reimburse employees for certain expenses like travel, meals, or entertainment without having to report them as employee 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. 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 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 the last half of 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and calculate whether those allow you to deduct more than the standard mileage rate would have
- Consider Tax Loss Carryover —
You're allowed to carryover some deductions into another year. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. One benefit of consulting with a knowledgeable Olivette, MO tax planner is that they will work with you and the person who prepares your taxes to determine if there are ways to strengthen your long-term financial success.
Other services we offer in Olivette, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Olivette, MO | Correct Capital Wealth Management
At Correct Capital, our Olivette, MO 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, you need a team around you that will help, like your Olivette, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial services in Olivette, MO, call Correct Capital today at 877-930-4015 or contact us online.
