Tax Planning
Tax Planning in Sappington, MO. Tax liability refers to how much taxes you will need to pay to local, state, and federal entities. While taxes may be one of the two certainties in life, there are perfectly legal ways you can reduce how much you owe. Tax planning is also key for successful retirement planning. At Correct Capital, we partner with local Sappington, MO individuals, families, and businesses to find creative and proven ways to reduce how much they owe. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out through our website, or read the article below to see how prudent tax planning can keep more money in your account both now and in the future.
Tax Planning for Sappington, MO Individuals and Families
Diligent tax planning can help individuals and families put more in their retirement accounts and have extra money for the short-term. Some things to take advantage of when tax planning in Sappington, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount 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 one by one. The downside is that doing your taxes takes longer, and you will have to document why you are eligible for the deduction when you send your returns.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Contributions to a traditional IRA can be deducted from your taxable income, and the money is not taxed until 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 what may be better for you in terms of tax planning. For instance, if you anticipate being in a higher tax bracket down the road, you can transfer money from a traditional IRA to a Roth IRA to pay taxes on the transfer, while allowing the money to grow tax-free.
If you contribute to a 401(k) plan through your job, you can choose to have money deposited into your 401(k) account instead of it going to your paycheck. You can contribute up to $20,500 to a 401(k) in 2022, or as much as $27,000 if you're at least 50 years old. For 2023, you can deposit as much as $22,500 or $30,000.
If you're have freelance income, there are also retirement plans available, like 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 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. You can deduct up to $3,000 in capital gains losses per year, but you may be able to deduct higher losses in the future.
- 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 tuition to an undergraduate, graduate and professional degree courses for your or a child, as well as courses that improve your job skills in order to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
More than 9 out of 10 married couples file jointly. It helps spouses qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. However, 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 be preferable to file separately to qualify for the 7.5% limit for unreimbursed medical expenses.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income via charitable donations. Qualifying organizations include:
- 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 donations are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the donations are for public use
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. law
If you start 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 at least 70½ years old, you can make what's referred to as a qualified charitable distribution by transferring up to $100,000 a year from a traditional IRA directly to a non-profit organization tax-free. If you are 72 or older, that donation counts as your required minimum distribution.
When you consult with an experienced financial planner for your tax planning in Sappington, MO|With the help a financial adviser in Sappington, MO, you can not only pay less in taxes this year, but understand how to get further benefits once you retire.
Tax Planning for Sappington, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Ways to owe less in taxes when tax planning for your Sappington, MO business include:
- Review 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 have consequences for both your corporate and your individual tax rate.
- Review Your Employees' Employer-Sponsored Retirement Plans —
Offering your employees retirement plans, such as 401(k)s, 403(b)s, and other defined contribution plans is a great way to reduce your tax liability. The "SECURE" Act of 2019 offers new benefits for employers who offer 401(k)s and SIMPLE IRAs with automatic enrollment, so it may be best to meet with a financial advisor in Sappington, 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 an employer would need to contribute several hundred thousand dollars per year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can result in higher taxes for you. See if your employees would be willing to accept other benefits as part of their compensation, instead of just rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, sick leave, or paying for courses that help in their career.
You can also use accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without counting the reimbursement as income.
- Put Your Family On the Payroll —
Children can work for you tax-free on income up to $12,000, and you can help them start saving for retirement through an account such as a ROTH IRA. You can double your retirement plan contributions if your spouse work for the business.
- Have a Company Vehicle —
If you and your employees need to drive as part of the normal course of your business, you can deduct the transportation costs. There are two different ways of deducting those expenses:
- Use 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 if your deduction would be more than the standard mileage rate
- Consider Carryover Deductions —
You're allowed to carryover some deductions into another year. These can include a home office deduction, net operating losses, business credits, and capital losses.
US lawmakers are always making new tax laws for businesses, or changing old ones. One advantage of working with a professional Sappington, MO tax planner is that they will work with you and the person who prepares your taxes to discover if there are ways to strengthen your personal and business financial success.
Other services we offer in Sappington, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Sappington, MO | Correct Capital Wealth Management
At Correct Capital, our Sappington, MO financial advisors know strong financial health is key to your overall success. That is why we hold ourselves to the fiduciary standard: we are legally and ethically bound to act in your best interest. With tax law always changing, you need a team around you that will help, like your Sappington, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Sappington, MO, call Correct Capital today at 877-930-4015 or contact us online.
