Tax Planning
Tax Planning in Pomona, CA. Tax liability refers to the amount you owe in taxes to local, state, and federal authorities. While it’s inevitable that a part of your earnings or profits goes to taxes, there are numerous legal strategies to lessen your tax burden. Tax planning is also essential for successful retirement planning. At Correct Capital, although we do not provide tax advice, we work alongside local Pomona, CA individuals, families, and businesses to find inventive and reliable ways to reduce their tax obligations. For instance, we might advise an individual to maximize deductible contributions to their retirement plan, which can help lessen tax costs. Reach out to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read on to see how effective tax planning can make a difference.
Tax Planning for Pomona, CA Individuals and Families
Effective tax strategies can help individuals and families build their retirement savings and give them more money for both today and in the near future. A few things to consider when tax planning in Pomona, CA:
- Standard Deduction vs. Itemizing —
The standard deduction is a automatic amount that reduces your taxable income without needing specific proof of deductions. In 2024, the standard deductions are:
- $14,600 for single filers
- $29,200 for married, filing jointly
- $14,660 for married, filing separately
- $21,900 for head of household
If your deductible expenses exceed these amounts, you may benefit from itemizing your deductions, where you list each eligible deduction separately. However, itemizing requires more time and documentation to verify each deduction. A financial planner in Pomona, CA can help determine whether claiming the standard or itemized deduction is more suitable.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both present unique tax benefits. A traditional IRA allows for contributions that may be deductible, with taxes deferred until you withdraw funds. On the other hand, Roth IRAs do not offer a deduction for contributions, yet allow your money to grow tax-free. The best option depends on your individual financial picture and tax outlook. One potential strategy is a Roth conversion, which moves funds from a traditional to a Roth IRA, letting you pay taxes now and enjoy tax-free growth later.
If you have a 401(k) plan with your employer, it's possible to defer part of your salary directly into your 401(k) account. In 2024, the maximum contribution limit for a 401(k) is $23,000, with an additional $7,500 allowed if you’re 50 or older.
If you're self-employed or have freelance income, you may also establish a retirement plan that suits your situation. Options include a Simplified Employee Pension (SEP) IRA or a One-Participant 401(k) Plan, with contributions that can be deducted.
- Tax-Loss Harvesting —
Selling securities at a loss allows you to reduce the capital gains tax on profitable sales. Tax-loss harvesting is especially useful for short-term gains, where tax rates are higher than for long-term gains. You can deduct up to $3,000 in capital losses each year, with any remaining losses rolled over into future tax years.
- Consider Paying Next Year's Bills Now —
Medical expenses not reimbursed by insurance can be deducted if they exceed 7.5% of your AGI. Other potential deductions include prepaying property taxes if permitted, covering future tuition costs, or investing in career-advancing courses to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
Roughly 95% of married individuals file jointly, as this is required for some tax benefits and credits. For high-income spouses, filing separately may reduce their tax bracket, depending on income differences. If one spouse incurs significant medical expenses, it might be advantageous to file separately to meet the 7.5% threshold for medical deductions.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income by making donations to certain organizations. Under IRS guidelines, the following types of organizations may qualify:
- Non-profits that are religious, scientific, educational, or focused on preventing cruelty to animals or children
- Non-profits supporting veterans
- A domestic fraternal organization that operates under a "lodge system" as long as the funds are directed toward charity
- Cemetery companies or organizations
- Government agencies at any level within the U.S. when funds are for public benefit
- Canadian, Mexican, or Israeli organizations, provided they meet U.S. charity qualifications
*According to IRS Publication 526 (2023), Charitable Contributions
By opening a Donor-Advised Fund, you can make a large contribution now for an immediate tax deduction and recommend how the funds are allocated in the future.
Once you reach age 70½, you’re eligible to make a qualified charitable distribution by transferring up to $105,000 annually from your IRA directly to a charity without tax consequences. At age 73 and over, this donation meets the requirements for your required minimum distribution and could lessen both future required distributions and your tax bill.
By working with an experienced financial adviser for tax planning in Pomona, CA, you can reduce your tax liability this year and create a plan for managing taxes through retirement. At Correct Capital, our goal is to help you save now and position yourself for financial stability in the future.
Common Tax Planning Mistakes for Pomona, CA Individuals and Families
Effective tax planning is crucial for your family’s financial health. Unfortunately, errors in tax planning often cause people to owe more or miss savings opportunities. Here are a few frequent tax planning mistakes and ways Correct Capital can assist in preventing them:
- Not Maximizing Retirement Contributions —
By not maximizing contributions to retirement accounts like Traditional IRAs, Roth IRAs, or 401(k)s, you risk losing out on tax deductions and long-term growth opportunities.
How Correct Capital Helps: We review your financial situation to help you make the most of allowable contributions, lowering your taxes while securing a robust retirement future.
- Overlooking Available Tax Credits and Deductions —
Many miss out on significant credits and deductions, such as the Earned Income Tax Credit, Child Tax Credit, or deductions for healthcare and education expenses.
How Correct Capital Helps: Our team checks your tax return for any missed credits and deductions, with the goal of increasing your refund or decreasing your tax bill.
- Poor Record-Keeping —
When financial records are disorganized, it’s easier to overlook deductions and face issues at tax time. Proper documentation is critical for substantiating claims, especially during audits.
How Correct Capital Helps: We work with you to create efficient record-keeping practices and gather needed documentation, so all records are accessible when tax season arrives or if an audit occurs.
- Ignoring Tax-Efficient Investment Strategies —
Overlooking the tax impact of investment decisions can diminish your returns. This may include neglecting asset location strategies or failing to harvest tax losses.
How Correct Capital Helps: Our team provides insight on tax-efficient investment choices, assisting you in minimizing taxes on dividends, interest, and capital gains through strategic asset selection.
- Failing to Plan for Life Changes —
Life events, including marriage, divorce, welcoming a child, or buying a property, often alter your tax landscape considerably. Ignoring these life events may cause surprise tax liabilities.
How Correct Capital Helps: Our team works with you to adapt your tax planning to significant life events, so you maximize applicable credits and deductions and meet tax requirements.
- Underestimating Estimated Tax Payments —
For income not subject to withholding—like freelance or investment earnings—you may be required to make estimated tax payments. Without making these payments, you could face fines and interest charges.
How Correct Capital Helps: Our team assists in creating a cash reserve plan to ensure you meet estimated tax obligations, reducing the risk of penalties.
- Not Utilizing Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) —
HSAs and FSAs provide tax advantages for covering medical costs, but many eligible individuals miss out by not contributing.
How Correct Capital Helps: We help you explore the advantages of HSAs and FSAs, advising on how pre-tax contributions for healthcare can lower your taxable income.
- Overlooking Education Savings Plans —
By not using options like 529 plans, you could miss out on tax benefits that aid in saving for a child’s education.
How Correct Capital Helps: We guide you in setting up education savings accounts that provide tax-deferred growth and may offer state tax deductions.
- Not Reviewing Withholding Allowances —
Incorrect tax withholding—either too much or too little—may result in a big refund or an unexpected tax bill.
How Correct Capital Helps: We work with you to adjust your withholding allowances for improved cash flow and reduced surprises during tax season.
- Missing Opportunities for Charitable Contributions —
Not properly documenting charitable donations can lead to missed tax deductions.
How Correct Capital Helps: We help you plan charitable donations to take full advantage of tax benefits, offering assistance with Qualified Charitable Distributions when applicable.
Tax Planning for Pomona, CA Business Owners
Business owners in Pomona, CA can utilize tax planning strategies to maximize retained earnings in their business. Keep the following in mind for effective tax planning for your Pomona, CA business:
- Review the Structure of Your Business —
The structure of your business impacts tax planning and should be carefully considered. Structuring your business as an LLC, sole proprietorship, partnership, or S or C corporation will affect both corporate and individual tax rates.
- Review the Retirement Plans You Offer Employees —
Setting up retirement plans like 401(k)s, 403(b)s, and similar options can help reduce tax obligations. The "SECURE" Act of 2019 changed retirement plan rules for both small and large employers, so it’s wise to consult a financial advisor in Pomona, CA about how these changes impact tax planning.
For high-income business owners with well-paid employees, consider a Cash Balance Pension Plan. While this may involve substantial contributions, the tax savings can be considerable.
- Have Your Family Work For The Business —
Bringing family into the business offers tax perks, such as allowing children to work tax-free up to $14,600, and they can even start contributing to a ROTH IRA. Having your spouse on the payroll can let you double the amount you contribute to retirement.
- Use a Company Vehicle —
Depending on your business activities in Pomona, CA, both you and your employees could use a company vehicle and deduct the associated costs. There are two options for claiming this deduction:
- Take the standard mileage deduction of 67 cents per mile for gas and electric vehicles; or
- Keep a record of actual expenses, including maintenance, registration, and gas, to see if this results in a larger deduction than the standard mileage rate.
- Consider Fringe Benefits For Your Employees —
Raising employee salaries may lead to increased employment tax costs. See if employees are open to receiving fringe benefits as part of their pay package rather than a higher paycheck. Examples that could help reduce your tax liability include medical insurance, group life insurance, childcare support, transportation reimbursements, meal programs, family or medical leave, and reimbursement for continued education.
You can implement accountable plans to cover certain employee expenses, such as travel, meals, or entertainment, without reporting them as income.
- Look into Carryover Deductions —
If certain deductions aren’t usable this year, you may be able to apply them in a different tax year. These may include deductions such as home office expenses, net operating losses, business credits, and capital losses.
Tax regulations for businesses are always in flux. Working with a Pomona, CA tax planner offers the benefit of joint efforts with your tax professional to explore methods for boosting your financial future.
Common Tax Planning Mistakes for Pomona, CA Businesses
Efficient tax planning can help businesses reduce tax burdens and boost profitability. Yet, numerous businesses make frequent tax errors that result in increased tax bills, overlooked deductions, and potential penalties. Listed below are typical tax planning mistakes businesses make and how Correct Capital assists in avoiding them.
- Not Paying Estimated Quarterly Taxes —
Businesses may overlook or underpay quarterly estimated taxes, which can lead to penalties and interest from the IRS. Small businesses, freelancers, and companies with fluctuating income are particularly susceptible to this.
How Correct Capital Helps: Our team assists in calculating and timing estimated tax payments to keep businesses compliant with IRS rules and avoid penalties.
- Neglecting Retirement Plan Contributions for Owners and Employees —
Retirement plan contributions are often underused by businesses to reduce taxable income. Options such as 401(k)s, SEP IRAs, and Solo 401(k)s deliver notable tax benefits for both owners and staff.
How Correct Capital Helps: We assist businesses in establishing retirement plans that cut taxes and appeal to prospective and current employees.
- Not Planning for Profitability and Cash Flow —
Some businesses only focus on minimizing their current tax bill, neglecting long-term growth and profitability. This short-term focus can result in missed chances for strategic investments or tax-efficient growth strategies.
How Correct Capital Helps: We offer comprehensive tax planning that extends beyond immediate deductions, helping businesses plan for growth, reinvest profits, and manage cash flow effectively.
- Neglecting Exit and Estate Planning —
A succession plan addressing the financial aspects of selling a business is often overlooked by owners. Owners frequently concentrate on operations and may neglect how to allocate proceeds from a sale in a tax-effective manner. Without proper estate planning, owners might not fully address their loved ones’ and beneficiaries’ financial security.
How Correct Capital Helps: We provide assistance in exit planning, helping business owners determine where to allocate sale proceeds. We aim to identify the purpose of sale proceeds and apply estate planning principles, so beneficiaries are accounted for and taxes are efficiently managed.
Tax Planning in Pomona, CA | Correct Capital Wealth Management
Our Pomona, CA financial advisors and tax planners at Correct Capital know that your financial security—whether for family or business—is crucial now and in the long term. For this reason, we follow the fiduciary standard and our I.O.U. promise, meaning that every recommendation we provide is independent, objective, and unbiased. With tax laws constantly evolving, it’s essential to have a strong team in place, including your Pomona, CA financial advisor, tax professional, and attorney. For assistance with tax planning, retirement planning, or other financial needs in Pomona, CA, reach out to Correct Capital at 877-930-4015 or contact us online.
