Reduce Your Tax Liability With Correct Capital's Financial Advisors in St. Clair County, IL
Tax Planning in St. Clair County, IL. 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, there are perfectly legal ways you can reduce how much you owe. Tax planning is also key to planning the golden years of your dreams. At Correct Capital, we work with St. Clair County, IL individuals, families, and businesses in the St. Clair County, IL area to find creative and proven ways to reduce how much they owe. Speak to Correct Capital's financial planners and fiduciary advisors today at 314-930-401(k), contact us online, or read on to discover how diligent tax planning can keep more money in your account both now and in the future.
Tax Planning for St. Clair County, IL Individuals and Families
Prudent tax planning can help individuals and families increase their retirement savings and have extra money for the short-term. Ways to reduce how much you owe when tax planning in St. Clair County, IL are:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked figure that ensures all tax payers have at least some income that won't be taxed. In 2022 and 2023, the standard deductions are:
- $12,950 for single filers
- $25,900 for married, filing jointly
- $12,950 for married, filing separately
- $19,400 for head of household
- $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 disadvantage is that it will take longer to complete your return, and you have to prove each deduction.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Money you put into a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Savings put into a Roth IRA 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 unique situation will determine whether a Traditional or Roth IRA is preferable in terms of tax planning. For example, if you expect your taxes to go up down the road, 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 have a 401(k) plan through your work, you can choose to have money 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, 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 lose money on the sale of any securities, 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 often higher than long-term. The maximum deductible amount is $3,000 per year, but you may be able to deduct higher losses down the road.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can write off 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 file jointly. It's the only way to qualify for certain tax credits and reductions. However, if both spouses earn substantial incomes, 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 unreimbursed medical expenses.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. 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," as long as the money are used for charity
- Cemetery organizations
- Any government entities, as long as the funds are for public use
- Often, 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 save money in a Donor-Advised Fund, you can contribute a bulk amount now for an immediate tax reduction, and recommend how the funds are distributed over the years that follow.
If you are at least 70½ years of age, you can make what's referred to as a qualified charitable distribution by transferring no more than $100,000 a year from a traditional IRA directly to a non-profit organization tax-free. If you are 72 or older, that transfer counts as your required minimum distribution.
When you use a knowledgeable financial planner for your tax planning in St. Clair County, IL|With the help a financial adviser in St. Clair County, IL, you can not only pay less in taxes this year, but understand how to get further benefits once you retire.
Tax Planning for St. Clair County, IL 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. Clair County, IL business include:
- Evaluate 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.
- Review Your Employees' Employer-Sponsored Retirement Plans —
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's likely in your best interest to meet with 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 you must contribute several hundred thousand dollars each year, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher taxes for you. Ask your employees if they would be open to fringe benefits as part of their compensation, instead of just rewarding them with a raise. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also set up accountable plans to pay employees back for business expenses without counting the reimbursement as income.
- Put Your Family On the Payroll —
If you hire your children, they do not have to pay taxes on their first $12,000 in income, and you can help them start saving for retirement through an account such as a ROTH IRA. If both you and your spouse work for the business, you can double your retirement plan contributions.
- Have 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. You can make the deduction in two ways:
- 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 half of 2022); or
- Document your actual expenses, like maintenance, registration fees, and gas, and figure out whether those allow you to deduct more than the standard mileage rate would have
- Consider 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.
Tax laws for businesses are always changing. One advantage of consulting with a knowledgeable 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 long-term financial success.
Other services we offer in St. Clair County, IL include:
- Self-Employed Retirement Plans
- 401(k) For Small Business
- Small Business Retirement Plans
- Social Security Consultants Near Me
- Retirement Calculator
- Retirement Planning
- Rollover 401(k)
- Wealth Management
- 401k Companies
Tax Planning in St. Clair County, IL | Correct Capital Wealth Management
At Correct Capital, our St. Clair County, IL tax planners 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. Clair County, IL financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial needs in St. Clair County, IL, call Correct Capital today at 314-930-401(k) or contact us online.