Reduce Your Tax Liability With Correct Capital's Financial Advisors in St. Louis County, MO
Tax Planning in St. Louis County, MO. Tax liability refers to how much you owe in taxes to local, state, and federal governments. Even though Uncle Sam will always get some percentage of your earnings or profits, The IRS allows for several ways you can reduce how much you owe. Tax planning is also essential to planning the golden years of your dreams. At Correct Capital, we partner with St. Louis County, MO individuals, families, and businesses in the St. Louis County, MO area to find creative and time-tested ways to reduce their tax burden. Speak to Correct Capital's financial and fiduciary advisors today at 314-930-401(k), reach out through our website, or read the article below to learn how judicious tax planning can benefit you.
Tax Planning for St. Louis County, MO Individuals and Families
Smart tax planning can help individuals and families put more in their retirement accounts and afford them more money for both now and the near future. Ways to reduce how much you owe when tax planning in St. Louis County, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar amount that you can deduct from your taxable income. 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 more income that shouldn't be taxed than the above, you can itemize your return. The downside is that filing will be more complicated, and you will have to document why you are eligible for the deduction when you send your returns.
- Evaluate Your Retirement Accounts —
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 the money is not taxed until you withdraw it. Roth IRA contributions are not deductible, but the money grows tax free. Your age, income, and other factors will determine what may be better for you in terms of tax planning. For instance, if you anticipate have more tax liability down the road, you can move funds from a traditional IRA to a Roth IRA to pay taxes on the conversation, 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 contribute up to $20,500 to a 401(k) in 2022, or up to $27,000 if you're 50 or older. For 2023, you can contribute up to $22,500 with an extra $7,500.
If you're have freelance income, 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 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 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 medical expenses your insurance didn't cover, you can write off those that are greater than 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 child'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. But, if both spouses have considerable earnings, they may be in a lower tax bracket if they file separately. If one spouse received considerable medical care in a given year, it may be preferable to file separately to qualify for the 7.5% limit for medical deductions.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. 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," as long as the funds are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as 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 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 older than 70½, you can make what's called a qualified charitable distribution by transferring up to $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 use 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 now while also setting you up for a financially secure future.
Tax Planning for St. Louis County, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your St. Louis County, MO business include:
- Review 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.
- Assess 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 offers new benefits for employers who offer 401(k)s and SIMPLE IRAs with automatic enrollment, so it's likely in your best interest to consult a financial advisor in St. Louis County, 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 contribute several hundred thousand dollars per year, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Only offering raises can result in higher taxes for you. See if your employees 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 expenses, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also use accountable plans to pay employees back for business expenses without having to report them as employee 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 kick-start their retirement savings through an account like a ROTH IRA. You can double how much you're allowed to put into retirement plans by having your spouse work for the business.
- Use a Company Vehicle —
If you and your employees need to drive as part of the normal course of your business, you can 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 half of 2022) or 62.5 cents per mile (for July to December in 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and determine if your deduction would be more than the standard mileage rate
- Look into Tax Loss Carryover —
If you're not able to make certain deductions this year, you may be able to carry them over into another year. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. A key benefit of consulting with an experienced 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 strengthen your long-term 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
- 401(k) For Small Business
- Small Business Retirement Plans
- Social Security Consultants Near Me
- Retirement Calculator
Tax Planning in St. Louis County, MO | Correct Capital Wealth Management
At Correct Capital, our St. Louis County, MO financial advisors know strong financial health is key 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, it's important to put a team around you that will help, like your St. Louis County, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial needs in St. Louis County, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.