Tax Planning
Tax Planning in St. Charles, MO. Tax liability refers to how much you owe in taxes to local, state, and federal entities. Even though taxes may be one of the two certainties in life, The IRS allows for several ways to reduce how much money you have to pay. Tax planning is also key for successful retirement planning. 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 877-930-4015, contact us online, or read the article below to learn how judicious tax planning can keep more money in your pocket both now and in the future.
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Tax Planning for St. Charles, MO Individuals and Families
Diligent tax planning can help individuals and families put more in their retirement accounts and have extra money for the short-term. Ways to reduce your tax liability when tax planning in St. Charles, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar figure that reduces the amount of income you are taxed on. 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 count up each deduction you're eligible for one by one. The drawback is that doing your taxes takes longer, 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 may be fully or partially deductible, and the money is not taxed until you withdraw it. Roth IRA contributions do not affect your taxable income, 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 age, income, and other factors will determine which type of account is preferable in terms of tax planning. For instance, if you expect your taxes to go up in the future, you can move savings from a traditional IRA to a Roth IRA to pay taxes on the transfer, and enjoy tax-free withdrawals when you need the money in retirement.
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 place up to $20,500 to a 401(k) in 2022, or as much as $27,000 if you're 50 or older. 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 the funds you put there from your taxable income.
- Tax-Loss Harvesting —
If you lose money on the sale of any stocks, bonds, or options, you can use that loss to reduce your taxable capital gains. Tax-loss harvesting is more common with short-term capital gains, as the tax rate is typically higher than long-term. The maximum deductible amount is $3,000 per year, but you may be able to deduct higher losses in future years.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, 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 file jointly. It's the only way to get certain tax credits and reductions. However, if both spouses have considerable earnings, 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 meet the 7.5% threshold for medical deductions.
- Contribute to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. Qualifying charities are:
- Non-profit organizations that are religious, scientific, educational, or dedicated to the prevention of cruelty to animals and children
- Veterans' organizations
- A domestic fraternal organization operating under the "lodge system," under the condition that the donations are used for charity
- Cemetery companies
- Any government entities, under the condition that the funds are meant to benefit the public
- In many cases, 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 at least 70½ years of age, 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 charity tax-free. If you are 72 or older, that transfer counts as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in St. Charles, MO|With the help a financial planner in St. Charles, MO, you can not only reduce your tax liability this year, but plan out your taxes into 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 owe less in taxes when tax planning for your St. Charles, MO business include:
- Evaluate the Structure of Your Business —
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 how much you pay in taxes both as a business and individually.
- 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, 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 an employer would need to considerable sums of money per year, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can result in higher taxes for you. Ask your employees if they would be open to fringe benefits rather than 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, family or medical leave, or continuing education reimbursement.
You can also set up accountable plans to reimburse employees for certain expenses like travel, meals, or entertainment without counting the reimbursement as income.
- Put Your Family On the Payroll —
Children can work for you tax-free on income up to $12,000, and you can help them begin to save in a vehicle such as a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- 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 income. You can make the deduction in two ways:
- 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 the last half of 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and calculate whether those allow you to deduct more than the standard mileage rate would have
- Look into Carryover Deductions —
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 changing old ones. One advantage of working with a knowledgeable St. Charles, MO tax planner is that they will work with you and your tax professional to discover if there are ways to strengthen your personal and business 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
Tax Planning in St. Charles, MO | Correct Capital Wealth Management
At Correct Capital, our St. Charles, MO financial advisors know how important the financial health of your family or business is, both now and in the future. 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, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial needs in St. Charles, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
