Tax Planning
Tax Planning in St. Clair County, IL. Tax liability refers to how much you owe in taxes to local, state, and federal governments. While Uncle Sam will always collect some portion of your earnings or profits, 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 partner with local St. Clair County, IL individuals, families, and businesses to find creative and time-tested strategies for reducing their tax burden. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us through our website, or read on to discover how judicious tax planning can keep more money in your account both now and down the road.
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Tax Planning for St. Clair County, IL 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. Clair County, IL are:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount that you can deduct from your taxable income. 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 itemize your return. The disadvantage is that doing your taxes takes longer, and you have to prove each deduction.
- 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. Savings put into a Roth IRA are not deductible, but the money grows tax free. 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 down the road, you can convert 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 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, plus an extra $6,500 if you're at least 50 years old. For 2023, you can deposit as much as $22,500 or $30,000.
If you're have freelance income, there are also retirement plans available, such as a One-Participant 401(k) Plan, and you can deduct the savings you put there from your taxable income.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, you can use that loss to reduce your taxable capital gains. This strategy is utilized more 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 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 exceed 7.5% of your adjusted gross income. Paying property taxes early can also help you reduce your taxable income, 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 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. But, if both spouses have a high income, filing separately may reduce their combined tax liability. If one spouse received substantial medical treatment in a given year, it may make sense to file separately to meet the 7.5% limit for medical deductions.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income via charitable donations. Accepted organizations 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 organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the donations are meant to benefit the public
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. law
If you start a Donor-Advised Fund, you can contribute a large amount now for an immediate tax reduction, and recommend how the funds are distributed over the years that follow.
If you are older than 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 non-profit organization tax-free. If you are 72 or older, that donation counts as your required minimum distribution.
When you use an experienced financial planner for your tax planning in St. Clair County, IL|With the assistance of a financial planner in St. Clair County, IL, you can not only reduce your tax liability this year, but plan out your taxes into retirement.
Tax Planning for St. Clair County, IL Business Owners
With diligent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your St. Clair County, IL 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 how much you pay in taxes both as a business and personally.
- Review the Retirement Plans You Offer Employees —
Offering retirement plans not only attracts and retains talent, but it also allows you to deduct contributions. The "SECURE" Act of 2019 changed rules for creating and maintaining retirement plans for both small and large employers, so it may be best to speak to a financial advisor in St. Clair County, IL about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While an employer would have to contribute several hundred thousand dollars per year, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Merely offering raises can result in higher taxes for you. Ask your employees if they would be willing to accept fringe benefits rather than just giving them more money. 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 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 begin to save in a vehicle like a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- Buy a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and subtract transportation expenses from your taxable income. You can make the deduction in two ways:
- Use the standard mileage rate to deduct 58.5 cents per mile (for the first half of 2022) or 62.5 cents per mile (for the last six months of 2022); or
- Document 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 Tax Loss Carryover —
You're allowed to carryover some deductions into another year. Common carryover deductions are 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 consulting with an experienced St. Clair County, IL 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. Clair County, IL include:
Tax Planning in St. Clair County, IL | Correct Capital Wealth Management
At Correct Capital, our St. Clair County, IL tax planners 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; you will only hear recommendations that are independent, objective, and unbiased. With tax law always changing, you need a team around you that will help, like your St. Clair County, IL financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial needs in St. Clair County, IL, call Correct Capital today at 877-930-4015 or contact us online.
