Tax Planning
Tax Planning in Olivette, MO. Tax liability refers to how much you owe in taxes to local, state, and federal entities. Even though taxes may be one of the two certainties in life, The IRS allows for several ways you can reduce how much you owe. Tax planning is also essential for successful retirement planning. At Correct Capital, we partner with local Olivette, MO individuals, families, and businesses to find creative and proven strategies for reducing how much they owe. Speak to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read the article below to learn how prudent tax planning can benefit you.
Tax Planning for Olivette, MO Individuals and Families
Prudent tax planning can help individuals and families increase their retirement savings and have extra money for the short-term. Ways to reduce your tax liability when tax planning in Olivette, MO are:
- 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 more income that shouldn't be taxed than the above, you can itemize your return. The downside is that filing will be more complicated, and you will have to document why you are eligible for the deduction when you send your returns.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Contributions to a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Roth IRA contributions do not affect your taxable income, but you will not be taxed on the withdrawal, as long certain requirements are met. Your age, income, and other factors will determine which type of account is preferable for your tax planning. For example, if you expect your taxes to go up down the road, you can move funds 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 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 sell securities at a loss, you can offset the amount of capital gains tax you would have to pay if other securities sold at a profit. This strategy is more common 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 additional losses can be carried over into future years.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can write off 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 in order to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS says that roughly 95% of married couples file jointly. 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 considerable earnings, filing separately may reduce their combined tax liability. If one spouse received substantial medical care in a given year, it may be preferable to file separately to meet the 7.5% threshold for medical deductions.
- Donate to Charity —
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 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 donations are used for charity
- Cemetery organizations
- 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 would qualify as a charity under U.S. law
If you deposit 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 down the road.
If you are at least 70½ years of age, 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 charity tax-free. If you are 72 or older, that transfer counts as your required minimum distribution.
When you consult with an experienced financial planner for your tax planning in Olivette, MO|With the assistance of a financial planner in Olivette, MO, they can help put more money in your pocket this year while also setting you up for a financially secure retirement.
Tax Planning for Olivette, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Ways to owe less in taxes when tax planning for your Olivette, MO business include:
- Review 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 individually.
- 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 likely in your best interest to speak to a financial advisor in Olivette, MO about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While an employer would need to contribute several hundred thousand dollars per year, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Only offering raises can lead to higher employment tax costs. Ask your employees if they would be open to other benefits rather than just giving them a raise. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also use accountable plans to pay employees back for business expenses without having to report them as employee income.
- Put Your Family On the Payroll —
If you get your children on the payroll, 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. You can double your retirement plan contributions if your spouse work for the business.
- Buy a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and 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 January to June in 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 determine if your deduction would be more than the standard mileage rate
- Consider Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over into subsequent years. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. A key 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 identify 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
- 401(k) For Small Business
- Small Business Retirement Plans
- Social Security Consultants Near Me
Tax Planning in Olivette, MO | Correct Capital Wealth Management
At Correct Capital, our Olivette, MO financial advisors know how important the financial health of your family or business is, both now and in the future. That's why we give our I.O.U. promise; all the advice we give you will be independent, objective, and unbiased. With tax law always changing, you need a team around you that will help, like your Olivette, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial needs in Olivette, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
