Reduce Your Tax Liability With Correct Capital's Financial Advisors in Rock Hill, MO
Tax Planning in Rock Hill, 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 you can reduce how much you owe. Tax planning is also important for successful retirement planning. At Correct Capital, we partner with Rock Hill, MO individuals, families, and businesses in the Rock Hill, MO area to find creative and proven ways to reduce their tax burden. Speak to Correct Capital's financial planners and fiduciary advisors today at 314-930-401(k), reach out through our website, or read on to see how diligent tax planning can benefit you.
Tax Planning for Rock Hill, MO Individuals and Families
Smart 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 Rock Hill, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is flat figure that you can deduct from your taxable income. In 2022 and 2023, the standard deductions are:
- $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 your deductible income is more than the above, you can itemize your return. The disadvantage is that doing your taxes takes longer, and you have to prove each deduction.
- Evaluate How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Money you put into a traditional IRA can be deducted from your taxable income, and you pay taxes on it when you withdraw it. Roth IRA contributions are not deductible, but you will not be taxed on the withdrawal, as long certain requirements are met. Your unique situation will determine whether a Traditional or Roth IRA is preferable for your tax planning. For example, if you expect your taxes to go up down the road, you can move savings from a traditional IRA to a Roth IRA to pay taxes on the conversation, 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 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, or as much as $27,000 if you're 50 or older. 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, like a One-Participant 401(k) Plan, and you can deduct the money you put there from your taxable income.
- 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. Tax-loss harvesting 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 unreimbursed medical expenses, you can write off those that are higher than 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 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's the only way to get certain tax credits and reductions. But, if both spouses have a high income, 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 qualify for the 7.5% limit for medical deductions.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Accepted 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," as long as the funds are used for charity
- Cemetery companies
- Any government entities, under the condition that the donations are meant to benefit the public
- 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 save money in a Donor-Advised Fund, you can contribute a large amount now for an immediate tax reduction, and recommend how the funds are distributed over the years that follow.
If you are over 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 non-profit organization tax-free. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in Rock Hill, MO|With the assistance of a financial planner in Rock Hill, MO, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for Rock Hill, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Rock Hill, MO business include:
- Evaluate the Structure of Your Business —
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.
- Assess the Retirement Plans You Offer Employees —
There are many benefits to offering employees a retirement plan, and reducing your tax liability is chief among them. The "SECURE" Act of 2019 offers new benefits for employers who offer 401(k)s and SIMPLE IRAs with automatic enrollment, so it's recommended to meet with a financial advisor in Rock Hill, 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 significant amounts of money each year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Merely offering raises can result in higher taxes for you. See if your employees would be open to fringe benefits as part of their compensation, instead of just giving them more money. 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 pay employees back for business expenses without having to report them as employee 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 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. There are two different means of deducting those costs:
- 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 July to December in 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and figure out 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 another year. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always changing. One advantage of working with an experienced Rock Hill, MO tax planner is that they will work with you and the person who prepares your taxes to discover if there are ways to improve your personal and business financial success.
Other services we offer in Rock Hill, MO include:
- 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
- Retirement Calculator
- Retirement Planning
Tax Planning in Rock Hill, MO | Correct Capital Wealth Management
At Correct Capital, our Rock Hill, 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, it's important to put a team around you that will help, like your Rock Hill, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Rock Hill, MO, call Correct Capital today at 314-930-401(k) or contact us online.