Tax Planning
Tax Planning in St. Charles County, MO. Tax liability refers to how much you owe in taxes to local, state, and federal entities. While Uncle Sam will always collect some portion of your earnings or profits, there are perfectly legal ways to reduce your tax liability. Tax planning is also key for successful retirement planning. At Correct Capital, we partner with local St. Charles County, MO individuals, families, and businesses to find creative and time-tested strategies for reducing their tax burden. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us through our website, or read on to discover how prudent tax planning can benefit you.
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Tax Planning for St. Charles County, MO Individuals and Families
Diligent tax planning can help individuals and families increase their retirement savings and afford them more money for both now and the near future. Ways to reduce your tax liability when tax planning in St. Charles County, 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, the standard deductions are:
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 itemize your return. The drawback is that filing will be more complicated, and you will have to document why you are eligible for the deduction when you send your returns.
- Evaluate How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. 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 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 unique situation will determine what may be better for you in terms of tax planning. For example, if you expect your taxes to go up in the future, you can convert 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 have a 401(k) plan with your employer, you can choose to defer income from your paycheck and have it placed directly in your 401(k). You can contribute 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 up to $22,500 or $30,000.
If you're self-employed, there are also retirement plans available, like a One-Participant 401(k) Plan, and you can deduct the savings you put there from your taxable income.
- Tax-Loss Harvesting —
If you sell stocks, bonds, or options 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 more common 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 you may be able to deduct higher losses in future years.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can deduct those that are higher 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 —
The IRS reports that roughly 95% of married couples choose to file joint tax returns. It helps couples qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. However, if both spouses are higher-earning individuals, filing separately may reduce their combined tax liability. If one spouse received substantial medical care in a given year, it may be preferable to file separately to meet the 7.5% limit for medical deductions.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying organizations include:
- 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 U.S. federal, state, local, or Native governments and subdivisions, under the condition that 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 open 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 over 70½, you can make what's known as a qualified charitable distribution by transferring no more than $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 donation qualifies as your required minimum distribution.
When you use a knowledgeable financial planner for your tax planning in St. Charles County, MO|With the help a financial adviser in St. Charles County, MO, you can not only reduce your tax liability this year, but plan out your taxes into retirement.
Tax Planning for St. Charles County, MO Businesses
Business owners can use smart tax planning to keep more money in their business. Ways to reduce your tax liability when tax planning for your St. Charles County, MO business include:
- Review 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 affect both your corporate and your individual tax rate.
- Assess the Retirement Plans You Offer Employees —
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 certain retirement plans, so it may be best to speak to a financial advisor in St. Charles County, MO about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While you must considerable amounts of money each year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Only offering raises can lead to higher employment tax costs. Talk to your employees about whether or not they would be open to fringe benefits as part of their compensation, instead of just rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, more paid time off, or continuing education reimbursement.
You can also use accountable plans to pay employees back for business expenses without having to report them as employee income.
- Have Your Family Work For The Business —
If you get your children on the payroll, they do not have to pay taxes on their first $12,000 in income, and you can help them begin to save in a vehicle like a ROTH IRA. You can double how much you're allowed to put into retirement plans if your spouse work for the business.
- Buy a Company Vehicle —
If you and your employees need to drive as part of the normal course of your business, you can subtract transportation expenses from your taxable profits. 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 the last six months 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 Tax Loss Carryforward —
If you're not able to make certain deductions this year, you may be able to carry them over into subsequent years. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Congress are always making new tax laws for businesses, or adjusting old ones. One advantage of consulting with a professional St. Charles County, 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 long-term financial success.
Other services we offer in St. Charles County, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in St. Charles County, MO | Correct Capital Wealth Management
At Correct Capital, our St. Charles County, MO tax planners know strong financial health is key to your overall success. That's why we give our I.O.U. promise; all the advice we give you will be independent, objective, and unbiased. With tax law always changing, it's important to put a team around you that will help, like your St. Charles County, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial services in St. Charles County, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
