Reduce Your Tax Liability With Correct Capital's Financial Advisors in Richmond Heights, MO
Tax Planning in Richmond Heights, MO. Tax liability refers to how much you owe in taxes to local, state, and federal entities. While taxes may be one of the two certainties in life, The IRS allows for several ways to reduce your tax liability. Tax planning is also important for successful retirement planning. At Correct Capital, we partner with Richmond Heights, MO individuals, families, and businesses in the Richmond Heights, MO area to find creative and time-tested strategies for reducing how much they owe. Speak to Correct Capital's financial and fiduciary advisors today at 314-930-401(k), reach out through our website, or read on to discover how prudent tax planning can benefit you.
Tax Planning for Richmond Heights, 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 take advantage of when tax planning in Richmond Heights, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar amount 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 more income that shouldn't be taxed than the above, you can itemize your return. The drawback is that doing your taxes takes longer, and you have to prove each deduction.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Contributions to a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Money put into a Roth IRA are not deductible, 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 age, income, and other factors will determine which type of account is preferable for your tax planning. For example, if you anticipate have more tax liability down the road, 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 have a 401(k) plan through your work, you can choose to defer income from your paycheck and have it placed directly in your 401(k). You can place up to $20,500 to a 401(k) in 2022, plus an extra $6,500 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 have freelance income, there are also retirement plans available, 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 securities, you can use that loss to reduce your taxable capital gains. Tax-loss harvesting 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 medical expenses your insurance didn't cover, you can write off those that are higher than 7.5% of your adjusted gross income. Paying property taxes early can also help you reduce your taxable income, and you can pay for a kid's tuition or for career-boosting classes for you early for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS reports that roughly 95% of married couples choose to file joint tax returns. It's the only way to qualify for certain tax credits and reductions. But, if both spouses earn considerable incomes, they may be in a lower tax bracket if they file separately. If one spouse received considerable medical treatment in a given year, it may make sense to file separately to meet the 7.5% threshold for unreimbursed medical expenses.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. Qualifying organizations 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," under the condition that the funds are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the funds are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. law
If you open a Donor-Advised Fund, you can contribute a bulk amount now for an immediate tax reduction, and recommend how the funds are distributed over the years that follow.
If you are at least 70½ years old, you can make what's known 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 transfer qualifies as your required minimum distribution.
When you consult with an experienced financial adviser for your tax planning in Richmond Heights, MO|With the help a financial planner in Richmond Heights, MO, they can help put more money in your pocket this year while also setting you up for a financially secure future.
Tax Planning for Richmond Heights, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Ways to reduce your tax liability when tax planning for your Richmond Heights, MO business include:
- Evaluate 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 have consequences for both your corporate and your individual tax rate.
- Evaluate the Retirement Plans You Offer Employees —
Offering retirement plans not only attracts and retains talent, but it also allows you to deduct contributions. 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 consult a financial advisor in Richmond Heights, MO about how they may apply to your business.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While a business owner must contribute several hundred thousand dollars per year, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher employment tax costs. See if your employees would be open to other benefits as part of their compensation, instead of just rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, help with childcare expenses, transportation reimbursement, meals, sick leave, or paying for courses that help in their career.
You can also use accountable plans to reimburse employees for business expenses without counting the reimbursement as income.
- Have Your Family Work For The Business —
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 them start saving for retirement through an account such as a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- 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 the first half of 2022) or 62.5 cents per mile (for the last six months 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
- Look into Carryover Deductions —
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 benefit of working with a professional Richmond Heights, MO tax planner is that they will work with you and your tax professional to discover if there are ways to improve your long-term financial success.
Other services we offer in Richmond Heights, MO include:
- Small Business Retirement Plans
- Social Security Consultants Near Me
- Retirement Calculator
- Retirement Planning
- Rollover 401(k)
- Wealth Management
- 401k Companies
- Financial Advisor
- Asset Management
Tax Planning in Richmond Heights, MO | Correct Capital Wealth Management
At Correct Capital, our Richmond Heights, MO financial advisors know strong financial health is essential 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 Richmond Heights, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial needs in Richmond Heights, MO, call Correct Capital today at 314-930-401(k) or contact us online.