Tax Planning
Tax Planning in Sioux Falls, SD. 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 vital to successful retirement planning. At Correct Capital, we don’t give tax advice; however, we partner with local Sioux Falls, SD people, families, and companies to explore effective and tried-and-true ways to reduce their tax obligations. One approach we may recommend is maximizing deductible employee or employer retirement contributions to reduce tax expenses. Reach out to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, connect with us online, or keep reading to learn how proactive tax planning can benefit you.
Schedule a Meeting With an Advisor Today
Correct Capital Wealth Management's office is physically located in St. Louis, MO, but we serve clients throughout the United States in both personal financial planning and corporate retirement plans.
Schedule a 15-Minute Introductory Call
More From Correct Capital Wealth Management
Explore how Correct Capital Wealth Management can help guide you toward smarter decisions, clearer goals, and lasting financial success.
Subscribe To Our Newsletter Listen To Our Podcast Watch Our YouTube Channel
Tax Planning for Sioux Falls, SD Individuals and Families
Smart tax planning can help individuals and families build their retirement savings and give them more money for both the present and the future. A few things to consider when tax planning in Sioux Falls, SD:
- Standard Deduction vs. Itemizing —
The standard deduction is a automatic 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
When your deductible income is more than the standard deduction, itemizing each eligible deduction may be advantageous. The drawback is that itemizing can be time-consuming and requires proof of each deduction. A financial planner in Sioux Falls, SD can assist in determining whether claiming the standard or itemized deduction is more suitable.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs both present unique tax benefits. With a traditional IRA, your contributions may be deductible, and you defer taxes until you take distributions. On the other hand, Roth IRAs do not offer a deduction for contributions, yet allow your money to grow tax-free. The best option depends on your individual financial picture and tax outlook. One potential strategy is a Roth conversion, which moves funds from a traditional to a Roth IRA, letting you pay taxes now and enjoy tax-free growth later.
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. For 2024, you can contribute up to $23,000 to a 401(k), plus an extra $7,500 if you are over age 50.
If you're self-employed or have freelance income, you may also establish a retirement plan that suits your situation. 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 approach is particularly beneficial for short-term capital gains, which are often taxed at higher rates than long-term gains. Each year, up to $3,000 in capital losses can be deducted, and extra losses can be carried forward to future years.
- Consider Paying Next Year's Bills Now —
Medical expenses not reimbursed by insurance can be deducted if they exceed 7.5% of your AGI. Additionally, you might consider paying property taxes early (if allowed by your municipality), prepaying a child’s tuition, or covering your own career-enhancing classes for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
Approximately 95% of married couples choose to file jointly, which is the only way to qualify for certain tax credits and deductions. However, if one spouse is a higher earner, filing separately might place them in a lower tax bracket. 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:
- Non-profit organizations focused on religion, science, education, or preventing cruelty to animals and children
- Veterans' organizations
- Domestic fraternal organizations operating under a "lodge system" if funds go to charity
- Organizations managing cemeteries
- Federal, state, local, or Native government entities, provided funds are for public purposes
- Certain Canadian, Mexican, or Israeli organizations that would be considered charitable under U.S. law
*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. Once you’re 73 or above, the donation can also be applied as your required minimum distribution, potentially lowering both future distribution requirements and tax obligations.
By working with an experienced financial adviser for tax planning in Sioux Falls, SD, you can reduce your tax liability this year and create a plan for managing taxes through retirement. At Correct Capital, we aim to put more money in your pocket now while preparing you for a secure financial future.
Common Tax Planning Mistakes for Sioux Falls, SD Individuals and Families
Effective tax planning is crucial for your family’s financial health. 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 miss out on significant credits and deductions, such as the Earned Income Tax Credit, Child Tax Credit, or deductions for healthcare and education expenses.
How Correct Capital Helps: Our advisors may review your tax return to see if you’ve claimed all available credits and deductions, aiming to maximize your refund (if eligible) or minimize any amount owed.
- Poor Record-Keeping —
Disorganized financial records can lead to missed deductions and complications when filing taxes. Without accurate documentation, you might struggle to substantiate claims if audited.
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 —
Neglecting tax-efficient investment strategies, such as asset location or tax-loss harvesting, can erode overall returns.
How Correct Capital Helps: We offer guidance on tax-efficient investing, helping you select suitable investment vehicles and strategies to reduce taxes on dividends, interest, and capital gains.
- Failing to Plan for Life Changes —
Life events, including marriage, divorce, welcoming a child, or buying a property, often alter your tax landscape considerably. Ignoring these life events may cause surprise tax liabilities.
How Correct Capital Helps: Our team works with you to adapt your tax planning to significant life events, so you maximize applicable credits and deductions and meet tax requirements.
- Underestimating Estimated Tax Payments —
Income that doesn’t undergo withholding, such as freelance or investment income, often requires estimated tax payments. Failure to do so can lead to penalties and interest.
How Correct Capital Helps: Our team assists in creating a cash reserve plan to ensure you meet estimated tax obligations, reducing the risk of penalties.
- Not Utilizing Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) —
HSAs and FSAs allow for tax-efficient healthcare spending, but they’re often underutilized by eligible individuals.
How Correct Capital Helps: Our advisors explain the advantages of HSAs and FSAs and determine if they’re right for you, helping you set aside pre-tax funds for medical costs to reduce taxes.
- Overlooking Education Savings Plans —
Failing to consider 529 college savings plans may mean missing valuable tax benefits for education savings.
How Correct Capital Helps: Our team assists you in establishing education savings plans that feature tax-deferred growth and potential state tax deductions.
- 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: Our advisors help you strategize charitable contributions to maximize deductions, including guidance on Qualified Charitable Distributions if eligible.
Tax Planning for Sioux Falls, SD Business Owners
Business owners in Sioux Falls, SD can benefit from effective tax planning to retain more money within their business. Keep the following in mind for effective tax planning for your Sioux Falls, SD business:
- Review the Structure of Your Business —
The structure of your business impacts tax planning and should be carefully considered. 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 —
Setting up retirement plans like 401(k)s, 403(b)s, and similar options can help reduce tax obligations. 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 Sioux Falls, SD about how these changes impact tax planning.
For business owners and employees with higher incomes, a Cash Balance Pension Plan can offer significant tax savings, even if it requires a sizable investment.
- 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 Sioux Falls, SD 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
- Maintain records of actual costs like maintenance, registration, and fuel to calculate whether this deduction is greater than the standard mileage rate.
- 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 —
If certain deductions can’t be claimed this year, it may be possible to carry them forward into a future tax year. Examples of carryover deductions include home office expenses, net operating losses, business credits, and capital losses.
Tax regulations for businesses are always in flux. Partnering with a professional tax planner in Sioux Falls, SD means they work with you and your tax expert to identify strategies for enhancing long-term financial outcomes.
Common Tax Planning Mistakes for Sioux Falls, SD Businesses
Effective tax planning allows businesses of all sizes to reduce tax liabilities and increase profitability. However, many businesses fall into common tax mistakes that may lead to higher taxes, missed deductions, or even penalties. Below are some of the most common tax planning errors businesses make and how Correct Capital can help you avoid them.
- Not Paying Estimated Quarterly Taxes —
Failing to pay or underpaying quarterly estimated taxes can result in IRS penalties and interest charges. Small businesses, freelancers, and companies with fluctuating income are particularly susceptible to this.
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 —
Focusing solely on cutting current taxes often leads businesses to miss out on planning for sustained growth and profitability. This short-term focus can result in missed chances for strategic investments or tax-efficient growth strategies.
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 —
Many business owners don’t establish a succession plan to handle the financial details involved in selling their business. Often focused on day-to-day business, owners can overlook how to handle proceeds from a sale to minimize taxes. Lacking estate planning, business owners risk missing chances to provide for beneficiaries and loved ones.
How Correct Capital Helps: We assist business owners with exit planning, guiding them in making informed decisions on how to allocate sale proceeds. 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.
Tax Planning in Sioux Falls, SD | Correct Capital Wealth Management
Correct Capital’s financial advisors and tax planners in Sioux Falls, SD recognize the importance of financial well-being for your family or business, today and into the future. For this reason, we follow the fiduciary standard and our I.O.U. promise, meaning that every recommendation we provide is independent, objective, and unbiased. Since tax laws are always changing, it’s vital to surround yourself with a solid team, such as your Sioux Falls, SD financial advisor, tax professional, and legal advisor. For assistance with tax planning, retirement planning, or other financial needs in Sioux Falls, SD, reach out to Correct Capital at 877-930-4015 or contact us online.
