Reduce Your Tax Liability With Correct Capital's Financial Advisors in Shrewsbury, MO
Tax Planning in Shrewsbury, MO. Tax liability refers to how much you owe in taxes to local, state, and federal authorities. Even though 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 to planning the retirement of your dreams. At Correct Capital, we work with Shrewsbury, MO individuals, families, and businesses in the Shrewsbury, MO area to find creative and proven ways to reduce how much they owe. Speak to Correct Capital's financial and fiduciary advisors today at 314-930-401(k), contact us through our website, or read on to see how diligent tax planning can keep more money in your account both now and down the road.
Tax Planning for Shrewsbury, MO Individuals and Families
Prudent tax planning is essential for individuals and families who want to increase their retirement savings and afford them more money for both now and the near future. Some things to consider when tax planning in Shrewsbury, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked amount that ensures all tax payers have at least some income that is not taxable. In 2022 and 2023, that flat-rate is:
- $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 more income that shouldn't be taxed than the above, you can itemize your return. The disadvantage is that it will take longer to fill out your return, and you will have to document why you are eligible for the deduction when you send your returns.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Savings 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 cannot be deducted from your taxable income, but the money grows tax free. Your age, income, and other factors will determine which type of account is preferable for your tax planning. For instance, if you anticipate being in a higher tax bracket down the road, you can transfer 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 contribute to a 401(k) plan with your employer, you can choose to have money 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, or up to $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, you can open up an individual retirement plan, such as 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 stocks, bonds, or options at a loss, you can use that loss to reduce your taxable capital gains. Tax-loss harvesting is utilized more with short-term capital gains, as the tax rate is usually 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 deduct those that exceed 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 tuition to an undergraduate, graduate and professional degree courses for your or a child, as well as courses that improve your job skills 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 helps spouses qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. But, if both spouses have considerable earnings, filing separately may reduce their combined tax liability. If one spouse received substantial medical treatment in a given year, it may make sense to file separately to meet 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 charities 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," under the condition that the funds are used for charity
- Cemetery companies
- Any government entities, as long as the donations are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, under the condition that the organization would have been organized as a charity under U.S. law
If you save money in 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 in the future.
If you are at least 70½ years old, you can make what's referred to as a qualified charitable distribution by transferring a maximum of $100,000 a year from a traditional IRA directly to a non-profit organization without having to pay taxes on it. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you use a knowledgeable financial planner for your tax planning in Shrewsbury, MO|With the assistance of a financial planner in Shrewsbury, MO, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for Shrewsbury, MO Business Owners
Business owners can use smart tax planning to keep more money in their business. Some things to consider when tax planning for your Shrewsbury, MO business include:
- Assess 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 the Retirement Plans You Offer Employees —
Offering retirement plans not only attracts and retains talent, but it also allows you to deduct contributions. The "SECURE" Act of 2019 changed rules for creating and maintaining retirement plans for both small and large employers, so it may be best to consult a financial advisor in Shrewsbury, MO about how those changes affect your tax planning.
a good idea if you and your employees are both higher-earning. While an employer must contribute several hundred thousand dollars each year, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Just offering more money can result in higher employment tax costs. Ask your employees if they would be open to other benefits as part of their compensation, instead of just giving them a higher paycheck. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also use accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without counting the reimbursement as income.
- Have Your Family Work For The Business —
Children can work for you tax-free on income up to $12,000, and you can help them begin to save in a vehicle like a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- Use a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and subtract transportation costs from your taxable income. You can make the deduction in two ways:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for the first half of 2022) or 62.5 cents per mile (for the last half of 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and determine if your deduction would be more than the standard mileage rate
- Look into Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over into another year. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. A key advantage of consulting with a professional Shrewsbury, MO tax planner is that they will work with you and the person who prepares your taxes to determine if there are ways to strengthen your personal and business financial success.
Other services we offer in Shrewsbury, 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 Shrewsbury, MO | Correct Capital Wealth Management
At Correct Capital, our Shrewsbury, MO financial advisors know how important the financial health of your family or business is, both now and in the future. 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 Shrewsbury, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial services in Shrewsbury, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.