Tax Planning
Tax Planning in Salt Lake City, UT. 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 a key factor in successful retirement planning. At Correct Capital, we don’t give tax advice; however, we collaborate with local Salt Lake City, UT individuals, families, and businesses to explore effective and tried-and-true ways to decrease their tax burden. We could suggest maximizing deductible retirement contributions, which could reduce tax costs. Reach out to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, get in touch online, or continue reading to understand the benefits of prudent tax planning.
Tax Planning for Salt Lake City, UT Individuals and Families
Smart tax planning can help individuals and families increase their retirement savings and offer them more money for both now and years to come. A few things to consider when tax planning in Salt Lake City, UT:
- Standard Deduction vs. Itemizing —
The standard deduction is a fixed amount that allows a straightforward deduction from your taxable income. 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. The drawback is that itemizing can be time-consuming and requires proof of each deduction. A financial planner in Salt Lake City, UT can work with you to decide whether taking the standard deduction or itemizing is more suitable.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both provide tax advantages, though in different ways. Contributions to a traditional IRA may be fully or partially deductible, and taxes are only applied upon withdrawal. Roth IRA contributions, in contrast, are not deductible but allow for tax-free growth on your investments. The ideal choice depends on your personal financial and tax situation. If you expect future tax rates to increase, a Roth conversion, or moving funds from a traditional IRA to a Roth IRA, might be wise to lock in tax-free growth while paying taxes upfront.
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. The 401(k) contribution limit for 2024 is $23,000, along with an additional $7,500 for individuals 50 or older.
Freelancers or self-employed individuals can open up personal retirement plans tailored to their needs. Options include a Simplified Employee Pension (SEP) IRA or a One-Participant 401(k) Plan, which allow you to deduct your contributions.
- Tax-Loss Harvesting —
By selling securities at a loss, you can offset capital gains taxes owed on gains from other investments. This strategy is commonly used with short-term capital gains, as these are usually taxed more heavily than 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 —
If you have unreimbursed medical expenses, you may be able to deduct amounts exceeding 7.5% of your adjusted gross income. 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. In situations where one spouse has substantial medical expenses, separate filing can help reach the medical deduction threshold.
- Make Charitable Donations —
By donating to qualifying organizations, you may deduct up to 60% of your adjusted gross income. According to IRS Publication 526, qualifying organizations include:
- Religious, scientific, educational, or anti-cruelty non-profit organizations for animals and children
- Veterans' organizations
- A domestic fraternal organization that operates under a "lodge system" as long as the funds are directed toward charity
- Non-profits or companies associated with cemeteries
- Federal, state, local, or Native government entities, provided funds are for public purposes
- Canadian, Mexican, or Israeli organizations, provided they meet U.S. charity qualifications
*According to IRS Publication 526 (2023), Charitable Contributions
Opening a Donor-Advised Fund allows for an upfront tax deduction with the flexibility to recommend how funds are distributed over time.
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. If you are 73 or older, that donation also counts toward your required minimum distribution, which may reduce both your future required distributions and tax burden.
Using a skilled financial adviser for tax planning in Salt Lake City, UT not only helps lower your tax bill this year but also lays out a strategy for retirement taxes. 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 Salt Lake City, UT Individuals and Families
Smart tax planning is vital for your family’s overall financial security. Unfortunately, errors in tax planning often cause people to owe more or miss savings opportunities. Here’s a look at some typical tax planning missteps and how Correct Capital helps you avoid them:
- Not Maximizing Retirement Contributions —
Failing to contribute the maximum allowable amounts to tax-advantaged retirement accounts, such as Traditional IRAs, Roth IRAs, or 401(k) plans, can lead to missed tax deductions and reduced growth potential over time.
How Correct Capital Helps: Our team assesses your finances to confirm you’re maximizing contributions, minimizing your tax burden while enhancing your retirement savings.
- Overlooking Available Tax Credits and Deductions —
Many people miss out on important tax credits and deductions, such as the Earned Income Tax Credit, Child Tax Credit, or deductions for education and medical 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 —
A lack of organized financial records may result in missed deductions and complications at tax filing time, and without the right documents, you may have trouble supporting claims if audited.
How Correct Capital Helps: Our team helps you establish organized record-keeping systems and locate required documents, making sure everything is available for tax filing or in case of an audit.
- 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 —
Major life events like marriage, divorce, having a child, or buying a home can have a substantial impact on your tax situation. Neglecting to adjust for these changes can lead to unexpected tax liabilities.
How Correct Capital Helps: We collaborate with you to update your tax planning strategies in response to life changes, ensuring you benefit from new deductions or credits and stay compliant with tax regulations.
- Underestimating Estimated Tax Payments —
If you earn income not subject to withholding, such as freelance or investment income, estimated tax payments may be necessary. Neglecting estimated tax payments may result in penalties.
How Correct Capital Helps: We work with you to build cash reserves to cover estimated tax payments, helping you avoid penalties and interest fees.
- 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 offer guidance on the benefits of HSAs and FSAs, assessing whether they suit your circumstances and helping you allocate pre-tax dollars for healthcare expenses to lower taxable income.
- Overlooking Education Savings Plans —
Ignoring options like 529 college savings plans can lead to missed tax benefits when saving for a child’s education.
How Correct Capital Helps: We help you open education savings accounts, allowing for tax-deferred growth and possible state tax benefits.
- Not Reviewing Withholding Allowances —
Withholding too much or too little tax from your paycheck often leads to surprises at tax time, like large refunds or owing taxes.
How Correct Capital Helps: Our team helps you adjust your W-4 form to achieve accurate withholding, enhancing cash flow and preventing unexpected tax bills.
- Missing Opportunities for Charitable Contributions —
If you don’t track or plan your charitable contributions, you could lose valuable deduction opportunities.
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 Salt Lake City, UT Business Owners
Business owners in Salt Lake City, UT can use strategic tax planning to keep more revenue within their business. Keep the following in mind for effective tax planning for your Salt Lake City, UT business:
- Review the Structure of Your Business —
How your business is structured is key for tax planning and requires thoughtful consideration. Forming your business as an LLC, sole proprietorship, partnership, or S or C corporation will influence both the corporate and personal tax rates.
- Review the Retirement Plans You Offer Employees —
Offering retirement benefits like 401(k)s, 403(b)s, or other defined contribution plans can lower your tax burden. 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 Salt Lake City, UT 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 —
Employing family members can yield tax advantages. Children can earn up to $14,600 without paying taxes and could start saving in a ROTH IRA. If your spouse works in the business, you may also double your retirement contributions.
- Use a Company Vehicle —
Based on your Salt Lake City, UT business type, you and your employees may qualify to use a company vehicle with deductible transportation costs. This deduction can be made in two ways:
- Deduct 67 cents per mile using the standard mileage rate, which applies to gas and electric vehicles alike; 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 —
Boosting employee wages often results in higher employment taxes. Consider whether employees would prefer fringe benefits instead of direct wage increases. Some options that may help lower your tax costs include health insurance, group life insurance, childcare assistance, travel reimbursements, meal programs, paid family leave, and education reimbursements.
Accountable plans allow for reimbursing employees for specific expenses, like travel, meals, or entertainment, without these amounts counting as income.
- Look into Carryover Deductions —
If certain deductions can’t be claimed this year, it may be possible to carry them forward into a future tax year. Potential carryover deductions are home office deductions, net operating losses, business credits, and capital losses.
Tax regulations for businesses are always in flux. One advantage of working with a professional Salt Lake City, UT tax planner is that they will collaborate with you and your tax professional to find ways to improve long-term financial success.
Common Tax Planning Mistakes for Salt Lake City, UT Businesses
With smart tax planning, businesses can minimize liabilities and enhance profitability. However, many businesses fall into common tax mistakes that may lead to higher taxes, missed deductions, or even penalties. Here’s a look at frequent tax pitfalls and how Correct Capital can help businesses steer clear of them.
- Not Paying Estimated Quarterly Taxes —
Failing to pay or underpaying quarterly estimated taxes can result in IRS penalties and interest charges. This is especially common among small businesses, freelancers, or companies with variable income.
How Correct Capital Helps: We help businesses accurately calculate and schedule estimated tax payments, ensuring compliance with IRS deadlines and preventing unnecessary penalties.
- Neglecting Retirement Plan Contributions for Owners and Employees —
Many businesses don’t fully utilize retirement plan contributions as a way to lower 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: Our team helps set up and optimize retirement plans that lower taxes and serve as a tool for recruiting and retaining employees.
- Not Planning for Profitability and Cash Flow —
Focusing solely on cutting current taxes often leads businesses to miss out on planning for sustained growth and profitability. Such a narrow focus may cause missed opportunities for reinvestment or tax-efficient growth.
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. Often focused on day-to-day business, owners can overlook how to handle proceeds from a sale to minimize taxes. Additionally, without estate planning, owners may miss opportunities to ensure beneficiaries and loved ones are taken care of.
How Correct Capital Helps: Our team supports business owners in exit planning, helping them decide how to manage the proceeds from a sale. We focus on defining the purpose of these funds and addressing them from an estate planning perspective, ensuring beneficiaries are considered and taxes are minimized through careful planning.
Other services we offer in Salt Lake City, UT include:
- Family Wealth Planning
- Financial Planning for Business Owners
- Comprehensive Financial Planning
- Retirement Income Planning
- Investment Planning
- Retirement Financial Planning
- Independent Financial Advisor
- Roth Conversion
- Investment Management
- 401(k) Audit
Tax Planning in Salt Lake City, UT | Correct Capital Wealth Management
At Correct Capital, our Salt Lake City, UT financial advisors and tax planners understand how essential the financial health of your family or business is, both now and in the future. That’s why we adhere to the fiduciary standard and our I.O.U. promise: all the advice we offer is independent, objective, and unbiased. As tax regulations evolve, it’s important to work with a team that includes your Salt Lake City, UT financial advisor, tax specialist, and attorney. For support with tax planning, retirement planning, or any other financial concerns in Salt Lake City, UT, contact Correct Capital at 877-930-4015 or reach out online.
