Tax PlanningReduce 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 taxes you pay each year to local, state, and federal governments. Even though Uncle Sam will always get some percentage of your earnings or profits, The IRS allows for several ways you can reduce how much you owe. Tax planning is also key to planning the golden years of your dreams. At Correct Capital, we partner with local Richmond Heights, MO individuals, families, and businesses to find creative and time-tested strategies for reducing their tax burden. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us online, or read the article below to see how diligent tax planning can benefit you.
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Tax Planning for Richmond Heights, MO Individuals and Families
Smart tax planning can help individuals and families put more in their retirement accounts and have extra money for the short-term. Some things to consider when tax planning in Richmond Heights, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar figure that ensures all tax payers have at least some income that won't be taxed. 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 your deductible income is more than the above, you can count up each deduction you're eligible for individually. 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. Savings you put into a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Roth IRA contributions 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 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 in the future, you can move savings from a traditional IRA to a Roth IRA to pay taxes on the transfer, and enjoy tax-free withdrawals when you need the money in retirement.
If you have a 401(k) plan through your job, you can choose to have earnings deposited into your 401(k) account instead of it going to your paycheck. 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 contribute up to $22,500 with an extra $7,500.
If you're self-employed, 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 sell securities at a loss, 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 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 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 child'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 —
More than 9 out of 10 married couples choose to file joint tax returns. It's the only way to get certain tax credits and reductions. But, if both spouses earn substantial incomes, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, it may make sense 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 when donating to certain organizations. Qualifying organizations include:
- 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 money are used for charity
- Cemetery organizations
- Any government entities, as long as the donations are for public use
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization meets the criteria for a charity under United States law
If you open 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 old, 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 non-profit organization tax-free. If you are 72 or older, that transfer counts 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 retirement.
Tax Planning for Richmond Heights, MO Businesses
Business owners can use effective tax planning to keep more money in their business. Ways to reduce your tax liability when tax planning for your Richmond Heights, 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 have consequences for both your corporate and your individual tax rate.
- Evaluate Your Employees' Employer-Sponsored Retirement Plans —
There are many benefits to offering employees a retirement plan, and reducing your tax liability is chief among them. The "SECURE" Act of 2019 changed rules for creating and maintaining retirement plans for both small and large employers, so it's recommended to consult a financial advisor in Richmond Heights, MO about how those changes affect your tax planning.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While an employer would have to significant sums of money each year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Only offering more money can lead to higher taxes for you. See if your employees would be willing to accept other benefits as part of their compensation, instead of just giving them a higher paycheck. Examples that could help reduce your tax liability are medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, sick leave, or continuing education reimbursement.
You can also use accountable plans to pay employees back for business expenses without counting the reimbursement as 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 such as a ROTH IRA. You can double your retirement plan contributions by having your spouse work for the business.
- Use 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:
- Take advantage of 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 whether those allow you to deduct more than the standard mileage rate would have
- Look into Tax Loss Carryforward —
You're allowed to carryover some deductions 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 an experienced Richmond Heights, 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 Richmond Heights, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
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, retirement planning, or any other financial services in Richmond Heights, MO, call Correct Capital today at 877-930-4015 or contact us online.