Tax Planning
Tax Planning in St. Charles, MO. Tax liability refers to how much taxes you pay each year to local, state, and federal authorities. While Uncle Sam will always collect some portion of your earnings or profits, there are perfectly legal ways you can reduce how much you owe. Tax planning is also important to planning the retirement of your dreams. At Correct Capital, we work with local St. Charles, MO individuals, families, and businesses to find creative and proven strategies for reducing how much they owe. Call Correct Capital's financial and fiduciary advisors today at 314-930-401(k), reach out online, or read the article below to see how judicious tax planning can benefit you.
Tax Planning for St. Charles, MO Individuals and Families
Diligent 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. Ways to reduce how much you owe when tax planning in St. Charles, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar 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 your deductible income is more than the above, you can count up each deduction you're eligible for individually. The downside is that it will take longer to complete your return, and you have to prove each deduction.
- Review 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 do not affect 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 have more tax liability in the future, you can move money from a traditional IRA to a Roth IRA to pay taxes on the conversation, while allowing the money to grow tax-free.
If you contribute to a 401(k) plan through your work, you can choose to have earnings 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, plus an extra $6,500 if you're 50 or older. For 2023, you can deposit up to $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 the funds you put there from your taxable income.
- Tax-Loss Harvesting —
If you sell securities 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. 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 unreimbursed medical expenses, you can deduct those that are greater than 7.5% of your adjusted gross income. Paying property taxes early can also lead to deductions, and you can pay for a kid's tuition or for career-boosting classes for you early 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 have a high income, filing separately may reduce their combined tax liability. If one spouse received considerable medical care in a given year, it may be preferable 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 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," under the condition that the funds are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the funds are for public use
- Often, a Canadian, Mexican, or Israeli organization, as long as the organization would qualify as a charity under U.S. law
If you save money in a Donor-Advised Fund, you can get a tax reduction by putting money into it 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 referred to as a qualified charitable distribution by transferring up to $100,000 a year from a traditional IRA directly to a charity tax-free. If you are 72 or older, that transfer counts as your required minimum distribution.
When you consult with an experienced financial adviser for your tax planning in St. Charles, MO|With the help a financial planner in St. Charles, MO, they can help put more money in your pocket this year while also setting you up for a financially secure retirement.
Tax Planning for St. Charles, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Ways to reduce your tax liability when tax planning for your St. Charles, MO business include:
- Evaluate 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 have consequences for both your corporate and your individual tax rate.
- Review Your Employees' Employer-Sponsored Retirement Plans —
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 consult a financial advisor in St. Charles, MO about how they may apply to your business.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While an employer would have to contribute several hundred thousand dollars per year, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages 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 rewarding them with a higher paycheck. Examples that could help reduce your tax liability are 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 reimburse employees for business expenses 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 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 —
Depending on the specifics of your business, you and your employees may be able to use a company vehicle and deduct the transportation costs. There are two different means of deducting those expenses:
- Use the standard mileage rate to deduct 58.5 cents per mile (for the first 6 months of 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 whether those allow you to deduct more than the standard mileage rate would have
- 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. 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 working with an experienced St. Charles, MO tax planner is that they will work with you and the person who prepares your taxes to identify if there are ways to strengthen your long-term financial success.
Other services we offer in St. Charles, 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, MO | Correct Capital Wealth Management
At Correct Capital, our St. Charles, MO financial advisors know strong financial health is essential to your overall success. That's why we give our I.O.U. promise; you will only hear recommendations that are 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, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial services in St. Charles, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.
