Tax Planning
Tax Planning in St. Peters, MO. Tax liability is how much taxes you pay each year to local, state, and federal governments. While Uncle Sam will always collect some percentage of your earnings or profits, The IRS allows for several 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 partner with St. Peters, MO individuals, families, and businesses in the St. Peters, MO area to find creative and time-tested ways to reduce how much they owe. Call Correct Capital's financial planners and fiduciary advisors today at 877-930-4015, reach out online, or read on to see how judicious tax planning can keep more money in your pocket both now and down the road.
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Tax Planning for St. Peters, MO Individuals and Families
Prudent 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 take advantage of when tax planning in St. Peters, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked figure that you can deduct from your taxable income. 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 individually. The disadvantage is that doing your taxes takes longer, and you have to prove each deduction.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Money you put into a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Money put into a Roth IRA do not affect your taxable income, but you will not be taxed on the withdrawal, as long certain requirements are met. Your age, income, and other factors will determine which type of account is preferable in terms of tax planning. For instance, if you expect your taxes to go up down the road, you can transfer savings from a traditional IRA to a Roth IRA to pay taxes on the transfer, while allowing the money to grow tax-free.
If you contribute to a 401(k) plan with your employer, 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, plus an extra $6,500 if you're 50 or older. For 2023, you can deposit up to $22,500 with an extra $7,500.
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 sell securities at a loss, 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 usually higher than long-term. You can deduct up to $3,000 in capital gains losses 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 higher 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 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'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 has a lot of medical expenses, it may be preferable to file separately to meet the 7.5% threshold for medical deductions.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. Accepted 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," under the condition that 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 meant to benefit the public
- Often, a Canadian, Mexican, or Israeli organization, as long as the organization would qualify as a charity under U.S. 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 in the future.
If you are older than 70½, you can make what's referred to as a qualified charitable distribution by transferring up to $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 use a knowledgeable financial planner for your tax planning in St. Peters, MO|With the help a financial adviser in St. Peters, 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. Peters, MO Businesses
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. Peters, MO business include:
- Review 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 how much you pay in taxes both as a business and personally.
- Evaluate 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 offers new benefits for employers who offer certain retirement plans, so it's likely in your best interest to speak to a financial advisor in St. Peters, 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 a business owner would have to contribute several hundred thousand dollars annually, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can result in higher taxes for you. See if your employees would be willing to accept other benefits rather than just giving them a raise. Examples that could help reduce your tax liability are medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also use accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without having to report them as employee income.
- Put Your Family On the Payroll —
Children 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 your retirement plan contributions if 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 subtract transportation expenses from your taxable income. There are two different means of deducting those expenses:
- 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 the last half of 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
- Consider Carryover Deductions —
You're allowed to carryover some deductions into another year. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always changing. A key benefit of working with a professional St. Peters, 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. Peters, MO include:
Tax Planning in St. Peters, MO | Correct Capital Wealth Management
At Correct Capital, our St. Peters, MO financial advisors know strong financial health is key 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. Peters, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial services in St. Peters, MO, call Correct Capital today at 877-930-4015 or contact us online.
