Tax Planning
Tax Planning in St. Louis, MO. Tax liability refers to 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 how much money you have to pay. Tax planning is also important to planning the retirement of your dreams. At Correct Capital, we work with local St. Louis, MO individuals, families, and businesses to find creative and proven ways to reduce how much they owe. Call Correct Capital's financial and fiduciary advisors today at 314-930-401(k), reach out through our website, or read on to see how diligent tax planning can keep more money in your pocket both now and in the future.
Tax Planning for St. Louis, MO Individuals and Families
Prudent tax planning is essential for individuals and families who want to 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, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is flat figure that reduces the amount of income you are taxed on. 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 more income that shouldn't be taxed 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 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. Money 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 anticipate being in a higher tax bracket in the future, you can move savings 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 have a 401(k) plan through your job, 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 as much as $27,000 if you're 50 or older. For 2023, you can contribute as much as $22,500 or $30,000.
If you're self-employed, you can open up an individual retirement plan, 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 securities, 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 more common with short-term capital gains, as the tax rate is typically 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 down the road.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can write off those that are greater than 7.5% of your adjusted gross income. Paying property taxes early can also lead to deductions, and you can pay for a kid's tuition or for career-boosting classes for you early in order to qualify 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. However, if both spouses earn considerable incomes, they may be in a lower tax bracket if they file separately. If one spouse received substantial medical treatment in a given year, it may be preferable to file separately to meet the 7.5% threshold for unreimbursed medical expenses.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income via charitable donations. Accepted charities 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," under the condition that the money are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the donations are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, as long as 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 old, you can make what's called a qualified charitable distribution by transferring no more than $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 donation qualifies as your required minimum distribution.
When you use a knowledgeable financial adviser for your tax planning in St. Louis, MO|With the help a financial planner in St. Louis, MO, you can not only reduce your tax liability this year, but plan out your taxes into retirement.
Tax Planning for St. Louis, MO Businesses
Business owners can use effective tax planning to keep more money in their business. Ways to reduce your tax liability when tax planning for your St. Louis, MO business include:
- Evaluate the Structure of Your Business —
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 affect how much you pay in taxes both as a business and personally.
- Assess the Retirement Plans You Offer Employees —
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 may be best to consult a financial advisor in St. Louis, MO about how those changes affect your tax planning.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While you would need to significant amounts of money annually, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher taxes for you. Ask your employees if they would be willing to accept fringe benefits rather than just rewarding them with a raise. Examples that could help reduce your tax liability are medical insurance, group life insurance, help with childcare expenses, transportation reimbursement, meals, sick leave, or paying for career-boosting courses.
You can also use accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without counting the reimbursement as income.
- Have Your Family Work For The Business —
If you get your children on the payroll, 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 your spouse works in the business, you can double your retirement plan contributions.
- Buy 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:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for January to June in 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 if your deduction would be more than the standard mileage rate
- Look into Carryover Deductions —
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.
Congress are always making new tax laws for businesses, or adjusting old ones. A key benefit of working with a knowledgeable St. Louis, MO tax planner is that they will work with you and your tax professional to identify if there are ways to strengthen your personal and business financial success.
Other services we offer in St. Louis, MO include:
- Retirement Plan Consultants
- 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
Tax Planning in St. Louis, MO | Correct Capital Wealth Management
At Correct Capital, our St. Louis, 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 act in your best interest. With tax law always changing, you need a team around you that will help, like your St. Louis, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in St. Louis, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.
