Tax Planning
Tax Planning in St. Charles County, MO. Tax liability refers to how much taxes you will need to pay to local, state, and federal governments. While Uncle Sam will always collect some percentage of your earnings or profits, The IRS allows for several ways you can reduce how much you owe. Tax planning is also essential for successful retirement planning. At Correct Capital, we partner with local St. Charles County, MO individuals, families, and businesses to find creative and proven strategies for reducing their tax burden. Call Correct Capital's financial planners and fiduciary advisors today at 314-930-401(k), contact us through our website, or read on to learn how judicious tax planning can benefit you.
Tax Planning for St. Charles County, 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 take advantage of when tax planning in St. Charles County, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked figure that you can deduct from your taxable income. 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 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 How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Money you put into a traditional IRA may be fully or partially deductible, 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 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 move 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 contribute to a 401(k) plan through your work, 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, plus an extra $6,500 if you're at least 50 years old. For 2023, you can contribute as much as $22,500 or $30,000.
If you're self-employed, there are also retirement plans available, such as a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you lose money on the sale of any stocks, bonds, or options, you can offset the amount of capital gains tax you would be liable for if other securities sold at a profit. This strategy is more common with short-term capital gains, as the tax rate is often 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 write off those that are greater than 7.5% of your adjusted gross income. Paying property taxes early can also help you reduce your taxable income, and you can 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 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 make sense to file separately to meet the 7.5% threshold for medical deductions.
- Contribute to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Accepted charities 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 funds are for public use
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization meets the criteria for a charity under United States 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 older than 70½, you can make what's called 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 St. Charles County, MO|With the assistance of a financial adviser in St. Charles County, MO, they can help put more money in your pocket now while also setting you up for a financially secure retirement.
Tax Planning for St. Charles County, MO Businesses
With prudent tax planning, business owners can keep as much of their profits as possible. Some things to consider 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 have consequences for both your corporate and your individual tax rate.
- Review 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 changed rules for creating and maintaining retirement plans for both small and large employers, so it's recommended to speak to a financial advisor in St. Charles County, MO about how those changes affect your tax planning.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While a business owner must contribute several hundred thousand dollars each year, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Merely offering raises can lead to higher taxes for you. Ask your employees if they would be willing to accept fringe benefits as part of their compensation, instead of just giving them more money. Common fringe benefits include medical insurance, group life insurance, help with childcare expenses, transportation reimbursement, meals, more paid time off, or paying for career-boosting courses.
You can also use accountable plans to reimburse employees for business expenses without counting the reimbursement as income.
- Have Your Family Work For The Business —
Your kids can work for you tax-free on income up to $12,000, and you can help them start saving for retirement through an account such as 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 costs from your taxable profits. There are two different ways of deducting those costs:
- 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 calculate if your deduction would be more than the standard mileage rate
- Consider Tax Loss Carryover —
You're allowed to carryover some deductions into another year. These can include a home office deduction, net operating losses, business credits, and capital losses.
US lawmakers are always making new tax laws for businesses, or adjusting old ones. A key advantage of working 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 strengthen your personal and business 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
- 401(k) For Small Business
- Small Business Retirement Plans
- Social Security Consultants Near Me
Tax Planning in St. Charles County, MO | Correct Capital Wealth Management
At Correct Capital, our St. Charles County, MO tax planners 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, 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, retirement planning, or any other financial services in St. Charles County, MO, call Correct Capital today at 314-930-401(k) or contact us online.
