Tax Planning
Tax Planning in St. Louis County, MO. Tax liability is how much taxes you will need to pay to local, state, and federal entities. Even though Uncle Sam will always collect some percentage of your earnings or profits, there are perfectly legal ways to reduce your tax liability. Tax planning is also key for successful retirement planning. At Correct Capital, we work with St. Louis County, MO individuals, families, and businesses in the St. Louis County, MO area to find creative and time-tested strategies for reducing how much they owe. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out through our website, or read on to discover how prudent tax planning can benefit you.
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Tax Planning for St. Louis County, MO Individuals and Families
Smart tax planning is essential for individuals and families who want to increase their retirement savings and have extra money for the short-term. Some things to consider when tax planning in St. Louis County, 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 itemize your return. The drawback is that it will take longer to fill out your return, and you have to prove each deduction.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Contributions to a traditional IRA may be fully or partially deductible, and you pay taxes on it when 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 unique situation will determine which type of account is preferable for your tax planning. For example, if you anticipate being in a higher tax bracket down the road, you can convert funds 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 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 with an extra $7,500.
If you're have freelance income, you can open up an individual retirement plan, 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 lose money on the sale of any stocks, bonds, or options, 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 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 medical expenses your insurance didn't cover, you can write off 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 for a child's tuition or for career-boosting classes for you early for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS says that roughly 95% of married couples file jointly. It helps spouses qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. However, if both spouses have a high income, they may be in a lower tax bracket if they file separately. If one spouse received considerable medical treatment in a given year, it may be preferable to file separately to meet the 7.5% limit for medical deductions.
- Contribute to Charity —
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 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 donations are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the funds are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. law
If you open 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 at least 70½ years of age, you can make what's referred to as a qualified charitable distribution by transferring a maximum of $100,000 a year from a traditional IRA directly to a charity without having to pay taxes on it. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in St. Louis County, MO|With the assistance of a financial planner in St. Louis County, 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. Louis County, 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. Louis County, MO business include:
- Assess the Structure of Your Business —
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.
- Assess 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 meet with a financial advisor in St. Louis County, MO about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While an employer would need to significant amounts of money annually, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher taxes for you. Talk to your employees about whether or not they would be open to other benefits rather than just rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, sick leave, or continuing education reimbursement.
You can also use accountable plans to pay employees back for business expenses 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 like a ROTH IRA. You can double how much you're allowed to put into retirement plans if your spouse work for the business.
- Have 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 costs from your taxable profits. You can make the deduction in two ways:
- Take advantage of 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 half 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.
US lawmakers are always making new tax laws for businesses, or adjusting old ones. A key benefit of working with a knowledgeable St. Louis County, MO tax planner is that they will work with you and the person who prepares your taxes to determine if there are ways to improve your personal and business financial success.
Other services we offer in St. Louis County, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in St. Louis County, MO | Correct Capital Wealth Management
At Correct Capital, our St. Louis County, MO tax planners know strong financial health is essential to your overall success. 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, you need a team around you that will help, like your St. Louis County, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial services in St. Louis County, MO, call Correct Capital today at 877-930-4015 or contact us online.
