Tax Planning
Tax Planning in Scottsdale, AZ. Tax liability refers to the amount you owe in taxes to local, state, and federal authorities. Although paying taxes is unavoidable, various lawful strategies can minimize how much you owe. Tax planning is also vital to successful retirement planning. At Correct Capital, we don’t offer tax advice, but we collaborate with local Scottsdale, AZ people, families, and companies to find inventive and reliable 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, contact us online, or read on to see how effective tax planning can make a difference.
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Tax Planning for Scottsdale, AZ Individuals and Families
Effective tax strategies can help individuals and families build their retirement savings and offer them more money for both today and in the near future. A few things to consider when tax planning in Scottsdale, AZ:
- Standard Deduction vs. Itemizing —
The standard deduction is a preset amount that you can deduct from your taxable income without additional documentation. 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. However, itemizing requires more time and documentation to verify each deduction. A financial planner in Scottsdale, AZ 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 offer tax benefits, but in distinct ways. A traditional IRA allows for contributions that may be deductible, with taxes deferred until you withdraw funds. Roth IRA contributions, in contrast, are not deductible but allow for tax-free growth on your investments. The best option depends on your individual financial picture and tax outlook. For example, if you anticipate higher taxes in the future, you might consider transferring money from a traditional IRA to a Roth IRA—a process known as a Roth conversion—paying taxes now but securing future tax-free growth.
If you have a 401(k) plan with your employer, you can defer income from your paycheck directly to your 401(k). The 401(k) contribution limit for 2024 is $23,000, along with an additional $7,500 for individuals 50 or older.
For self-employed individuals or those with freelance income, individual retirement plans are also available. 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 —
Selling securities at a loss allows you to reduce the capital gains tax on profitable sales. Tax-loss harvesting is especially useful for short-term gains, where tax rates are higher than for 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 —
For unreimbursed medical expenses, you can deduct costs that surpass 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. In cases where one spouse earns more, filing separately could result in a lower tax bracket for the higher earner. 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. Per IRS Publication 526, eligible organizations may include the following:
- Religious, scientific, educational, or anti-cruelty non-profit organizations for animals and children
- Organizations dedicated to veterans
- A domestic fraternal organization that operates under a "lodge system" as long as the funds are directed toward charity
- Organizations managing cemeteries
- Government agencies at any level within the U.S. when funds are for public benefit
- Canadian, Mexican, or Israeli organizations, provided they meet U.S. charity qualifications
*According to IRS Publication 526 (2023), Charitable Contributions
By opening a Donor-Advised Fund, you can make a large contribution now for an immediate tax deduction and recommend how the funds are allocated in the future.
If you are over 70½, you can make a qualified charitable distribution by transferring up to $105,000 per year from a traditional IRA directly to a charity, tax-free. 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.
By working with an experienced financial adviser for tax planning in Scottsdale, AZ, you can reduce your tax liability this year and create a plan for managing taxes through retirement. 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 Scottsdale, AZ Individuals and Families
Good tax planning plays an essential role in ensuring your family’s financial well-being. Yet, many people unintentionally make errors that could result in higher tax liabilities or missed savings opportunities. Below are some common tax planning errors and how Correct Capital can help 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: We review your financial situation to help you make the most of allowable contributions, lowering your taxes while securing a robust retirement future.
- 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 —
When financial records are disorganized, it’s easier to overlook deductions and face issues at tax time. Proper documentation is critical for substantiating claims, especially during audits.
How Correct Capital Helps: We work with you to create efficient record-keeping practices and gather needed documentation, so all records are accessible when tax season arrives or if an audit occurs.
- Ignoring Tax-Efficient Investment Strategies —
When investment decisions are made without considering tax consequences, returns may be reduced. This often happens when asset location strategies are ignored or tax losses are not harvested.
How Correct Capital Helps: We help you implement tax-efficient investment strategies, including selecting the best vehicles and methods to lower taxes on dividends, interest, and gains.
- Failing to Plan for Life Changes —
Significant life changes, such as marriage, divorce, becoming a parent, or purchasing a home, can greatly affect your tax obligations. Ignoring these life events may cause surprise 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 —
For income not subject to withholding—like freelance or investment earnings—you may be required to make estimated tax payments. Without making these payments, you could face fines and interest charges.
How Correct Capital Helps: We help you prepare your cash flow to cover estimated tax payments, avoiding fines and added interest.
- 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 help you explore the advantages of HSAs and FSAs, advising on how pre-tax contributions for healthcare can lower your taxable income.
- Overlooking Education Savings Plans —
Failing to consider 529 college savings plans may mean missing valuable tax benefits for education savings.
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 —
Incorrect tax withholding—either too much or too little—may result in a big refund or an unexpected tax bill.
How Correct Capital Helps: We assist in adjusting your W-4 form to ensure correct withholding, helping improve cash flow and avoid surprises when filing taxes.
- 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 Scottsdale, AZ Business Owners
Business owners in Scottsdale, AZ can use strategic tax planning to keep more revenue within their business. Keep the following in mind for effective tax planning for your Scottsdale, AZ business:
- Review the Structure of Your Business —
The structure of your business impacts tax planning and should be carefully considered. Structuring your business as an LLC, sole proprietorship, partnership, or S or C corporation will affect both corporate and individual 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. With changes under the "SECURE" Act of 2019, speaking to a financial advisor in Scottsdale, AZ about retirement plan tax benefits is recommended.
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 —
Bringing family into the business offers tax perks, such as allowing children to work tax-free up to $14,600, and they can even start contributing to a ROTH IRA. Employing your spouse can allow for increased retirement contributions, potentially doubling your retirement savings.
- Use a Company Vehicle —
Based on your Scottsdale, AZ business type, you and your employees may qualify to use a company vehicle with deductible transportation costs. You can take this deduction using one of two methods:
- Take the standard mileage deduction of 67 cents per mile for gas and electric vehicles; or
- Track your actual expenses, such as maintenance, registration fees, and fuel, to determine if this amount exceeds the standard mileage rate deduction.
- Consider Fringe Benefits For Your Employees —
Increasing wages for employees can drive up employment tax expenses. See if employees are open to receiving fringe benefits as part of their pay package rather than a higher paycheck. Possible fringe benefits that may reduce tax liabilities are health insurance, group life insurance, childcare assistance, transport reimbursements, meals, family or medical leave, and continuing education reimbursement.
Accountable plans allow for reimbursing employees for specific expenses, like travel, meals, or entertainment, without these amounts counting as income.
- Look into Carryover Deductions —
When some deductions are unavailable this year, they may be eligible for carryover into future years. These may include deductions such as home office expenses, net operating losses, business credits, and capital losses.
Tax regulations for businesses are always in flux. Working with a Scottsdale, AZ tax planner offers the benefit of joint efforts with your tax professional to explore methods for boosting your financial future.
Common Tax Planning Mistakes for Scottsdale, AZ 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. Listed below are typical tax planning mistakes businesses make and how Correct Capital assists in avoiding them.
- Not Paying Estimated Quarterly Taxes —
Businesses may overlook or underpay quarterly estimated taxes, which can lead to penalties and interest from the IRS. This is especially common among small businesses, freelancers, or companies with variable income.
How Correct Capital Helps: We provide support in calculating and scheduling estimated taxes so you meet IRS requirements and avoid penalties.
- Neglecting Retirement Plan Contributions for Owners and Employees —
Retirement plan contributions are often underused by businesses to reduce 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 —
Many companies prioritize short-term tax savings over long-term profitability and growth. 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 —
Business owners often fail to create a succession plan to address the financial aspects of selling their business. While they may focus heavily on operations, they might miss planning for how to manage and allocate the sale proceeds in a tax-efficient way. Lacking estate planning, business owners risk missing chances to provide for beneficiaries and loved ones.
How Correct Capital Helps: Our team supports business owners in exit planning, helping them decide how to manage the proceeds from a sale. We aim to identify the purpose of sale proceeds and apply estate planning principles, so beneficiaries are accounted for and taxes are efficiently managed.
Tax Planning in Scottsdale, AZ | Correct Capital Wealth Management
At Correct Capital, our Scottsdale, AZ 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. Since tax laws are always changing, it’s vital to surround yourself with a solid team, such as your Scottsdale, AZ financial advisor, tax professional, and legal advisor. For support with tax planning, retirement planning, or any other financial concerns in Scottsdale, AZ, contact Correct Capital at 877-930-4015 or reach out online.
