Tax Planning
Tax Planning in St. Louis Hills, MO. Tax liability is how much taxes you pay each year to local, state, and federal governments. 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 important for successful retirement planning. At Correct Capital, we partner with St. Louis Hills, MO individuals, families, and businesses in the St. Louis Hills, MO area to find creative and proven ways to reduce how much they owe. Speak to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us through our website, or read the article below to discover how judicious tax planning can benefit you.
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Tax Planning for St. Louis Hills, MO Individuals and Families
Prudent tax planning is essential for individuals and families who want to increase their retirement savings 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 Hills, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar amount that ensures all tax payers have at least some income that won't be taxed. 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 downside is that it will take longer to complete your return, and you have to prove each deduction.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Money you put into a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Roth IRA contributions are not deductible, but the money grows tax free. Your unique situation will determine what may be better for you in terms of tax planning. For example, if you expect your taxes to go up in the future, you can convert money 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 contribute to 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 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 your contributions there.
- Tax-Loss Harvesting —
If you lose money on the sale of any stocks, bonds, or options, you can offset the amount of capital gains tax you would be liable for if other securities sold at a profit. Tax-loss harvesting 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 you may be able to deduct higher losses in the future.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, you can deduct those that are greater 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 kid's tuition or for career-boosting classes for you early for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS reports that roughly 95% of married couples choose to file joint tax returns. It helps couples qualify for a higher standard deduction, in addition to a variety of tax credits not available to single filers. However, if both spouses earn high incomes, they may be in a lower tax bracket if they file separately. 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.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income via charitable donations. Qualifying organizations include:
- 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 companies
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the donations are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, as long as the organization meets the criteria for a charity under United States law
If you start 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 down the road.
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 without having to pay taxes on it. If you are 72 or older, that donation qualifies as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in St. Louis Hills, MO|With the help a financial adviser in St. Louis Hills, MO, you can not only reduce your tax liability this year, but plan out your taxes into retirement.
Tax Planning for St. Louis Hills, MO Business Owners
Business owners can use effective tax planning to retain more money in their business. Ways to reduce your tax liability when tax planning for your St. Louis Hills, MO business include:
- Assess 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.
- Evaluate 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 offers new benefits for employers who offer certain retirement plans, so it's recommended to speak to a financial advisor in St. Louis Hills, MO about how those changes affect your tax planning.
a good idea if you and your employees are both higher-earning. While an employer would need to significant amounts of money each year, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Only offering more money can lead to higher employment tax costs. Talk to your employees about whether or not they would be willing to accept other benefits rather than just rewarding them with a raise. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or continuing education reimbursement.
You can also use accountable plans to pay employees back 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 start saving for retirement through an account like a ROTH IRA. If both you and your spouse work for 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. There are two different ways of deducting those costs:
- Take advantage of 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 July to December in 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 Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over into subsequent years. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. A key advantage of working with a knowledgeable St. Louis Hills, MO 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. Louis Hills, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in St. Louis Hills, MO | Correct Capital Wealth Management
At Correct Capital, our St. Louis Hills, MO 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, it's important to put a team around you that will help, like your St. Louis Hills, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial needs in St. Louis Hills, MO, call Correct Capital today at 877-930-4015 or contact us online.
