Reduce Your Tax Liability With Correct Capital's Financial Advisors in Sunset Hills, MO
Tax Planning in Sunset Hills, MO. Tax liability is how much you owe in taxes to local, state, and federal authorities. While 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 key to planning the golden years of your dreams. At Correct Capital, we partner with Sunset Hills, MO individuals, families, and businesses in the Sunset Hills, MO area to find creative and proven strategies for reducing their tax burden. Call Correct Capital's financial and fiduciary advisors today at 314-930-401(k), reach out online, or read on to see how diligent tax planning can keep more money in your account both now and in the future.
Tax Planning for Sunset Hills, MO Individuals and Families
Diligent tax planning can help individuals and families increase their retirement savings and afford them more money for both now and the near future. Ways to reduce your tax liability when tax planning in Sunset Hills, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked figure that ensures all tax payers have at least some income that won't be taxed. 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 your deductible income is more than the above, you can count up each deduction you're eligible for one by one. The drawback is that filing will be more complicated, and you have to prove each deduction.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Contributions to a traditional IRA can be deducted from your taxable income, and the money is not taxed until you withdraw it. Money put into a Roth IRA are not deductible, but you will not be taxed on the withdrawal, as long certain requirements are met. Your age, income, and other factors will determine whether a Traditional or Roth IRA is preferable in terms of tax planning. For example, if you anticipate being in a higher tax bracket in the future, you can transfer funds 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 at least 50 years old. For 2023, you can contribute as much as $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 sell securities at a loss, you can offset the amount of capital gains tax you would have to pay if other securities sold at a profit. Tax-loss harvesting is more common 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 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 exceed 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 in order to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS says that roughly 95% of married couples choose to file joint tax returns. It's the only way to get certain tax credits and reductions. However, if both spouses earn considerable incomes, they may be in a lower tax bracket if they file separately. If one spouse has a lot of medical expenses, it may make sense 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 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," under the condition that the donations are used for charity
- Cemetery companies
- Any government entities, 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 start a Donor-Advised Fund, you can contribute a large 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 of age, 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 donation qualifies as your required minimum distribution.
When you use an experienced financial planner for your tax planning in Sunset Hills, MO|With the assistance of a financial planner in Sunset Hills, MO, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for Sunset Hills, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Ways to reduce your tax liability when tax planning for your Sunset Hills, 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 how much you pay in taxes both as a business and individually.
- Evaluate 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 offers new benefits for employers who offer certain retirement plans, so it's likely in your best interest to meet with a financial advisor in Sunset Hills, MO about how they may apply to your business.
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 per year, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher employment tax costs. Talk to your employees about whether or not they would be open to other benefits as part of their compensation, instead of just rewarding them with a higher paycheck. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also set up accountable plans to pay employees back for business expenses without counting the reimbursement as income.
- Have Your Family Work For The Business —
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. If your spouse works in the business, you can double your retirement plan contributions.
- Have 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 the last six months 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.
US lawmakers are always making new tax laws for businesses, or adjusting old ones. A key benefit of working with an experienced Sunset Hills, MO tax planner is that they will work with you and the person who prepares your taxes to identify if there are ways to strengthen your long-term financial success.
Other services we offer in Sunset Hills, MO include:
- Self-Employed Retirement Plans
- 401(k) For Small Business
- Small Business Retirement Plans
- Social Security Consultants Near Me
- Retirement Calculator
- Retirement Planning
- Rollover 401(k)
- Wealth Management
- 401k Companies
Tax Planning in Sunset Hills, MO | Correct Capital Wealth Management
At Correct Capital, our Sunset Hills, MO financial advisors 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 Sunset Hills, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial services in Sunset Hills, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.