Tax Planning
Tax Planning in Shrewsbury, MO. Tax liability is how much you owe in taxes to local, state, and federal entities. Even though Uncle Sam will always collect some percentage of your earnings or profits, there are perfectly legal ways you can reduce how much you owe. Tax planning is also essential to planning the retirement of your dreams. At Correct Capital, we partner with Shrewsbury, MO individuals, families, and businesses in the Shrewsbury, MO area to find creative and time-tested ways to reduce how much they owe. Call Correct Capital's financial planners and fiduciary advisors today at 877-930-4015, reach out through our website, or read on to see how prudent tax planning can benefit you.
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Tax Planning for Shrewsbury, MO Individuals and Families
Smart 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 are:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount that reduces the amount of income you are taxed on. 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 more income that shouldn't be taxed than the above, you can itemize your return. The disadvantage 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 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 age, income, and other factors will determine which type of account is preferable for your tax planning. For instance, if you anticipate have more tax liability down the road, you can convert funds from a traditional IRA to a Roth IRA to pay taxes on the transfer, while allowing the money to grow tax-free.
If you have 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 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 contribute 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 stocks, bonds, or options at a loss, you can use that loss to reduce your taxable capital gains. This strategy is utilized more with short-term capital gains, as the tax rate is often 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 medical expenses your insurance didn't cover, you can write off those that are greater 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 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's the only way to qualify for certain tax credits and reductions. However, if both spouses are higher-earning individuals, 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% threshold for unreimbursed medical expenses.
- Contribute to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. Accepted charities are:
- Non-profit organizations that are religious, scientific, educational, or for 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 organizations
- Any government entities, as long as the donations are meant to benefit the public
- In many cases, a Canadian, Mexican, or Israeli organization, as long as the organization would have been organized 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 of age, you can make what's referred to as 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 donation qualifies as your required minimum distribution.
When you use a knowledgeable financial adviser for your tax planning in Shrewsbury, MO|With the assistance of a financial adviser in Shrewsbury, MO, they can help put more money in your pocket now while also setting you up for a financially secure future.
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 —
There are many things to consider when deciding how to structure or restructure your business. Structuring your business as an LLC, sole proprietorship, partnership, or S or C corporation will affect both your corporate and your individual tax rate.
- Review 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 you would have to contribute several hundred thousand dollars annually, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Only offering raises can result in higher taxes for you. See if your employees would be willing to accept fringe benefits as part of their compensation, instead of just rewarding them with a raise. Examples that could help reduce your tax liability are medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, more paid time off, or paying for career-boosting courses.
You can also set up accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without having to report them as employee income.
- Put Your Family to Work —
Your kids can work for you tax-free on income up to $12,000, and you can help kick-start their retirement savings through an account like a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- Buy 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 expenses from your taxable income. There are two different means of deducting those expenses:
- Take advantage of 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 figure out 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 changing. One benefit of working with an experienced Shrewsbury, 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 Shrewsbury, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
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 do what's best for you and only you. 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 needs in Shrewsbury, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
