Tax Planning
Tax Planning in Sunset Hills, MO. Tax liability is how much taxes you pay each year to local, state, and federal authorities. While Uncle Sam will always collect some portion of your earnings or profits, The IRS allows for several ways to reduce your tax liability. Tax planning is also important for successful retirement planning. At Correct Capital, we partner with local Sunset Hills, MO individuals, families, and businesses to find creative and proven strategies for reducing how much they owe. Call Correct Capital's financial planners and fiduciary advisors today at 877-930-4015, contact us through our website, or read on to learn how prudent tax planning can benefit you.
Tax Planning for Sunset Hills, MO Individuals and Families
Prudent 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 include:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar amount that reduces the amount of income you are taxed on. In 2022 and 2023, that flat-rate is:
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 individually. The disadvantage is that doing your taxes takes longer, and you will have to document why you are eligible for the deduction when you send your returns.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Savings you put into 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 as you are over 59 1/2 and have had the account for at least five years. Your age, income, and other factors will determine what may be better for you in terms of tax planning. For example, 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 conversation, while allowing the money to grow tax-free.
If you have a 401(k) plan with your employer, you can choose to have earnings 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 contribute up to $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 savings you put there from your taxable income.
- Tax-Loss Harvesting —
If you sell stocks, bonds, or options at a loss, you can use that loss to reduce your taxable capital gains. This strategy is more common with short-term capital gains, as the tax rate is typically 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 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 tuition to an undergraduate, graduate and professional degree courses for your or a child, as well as courses that improve your job skills in order to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
More than 9 out of 10 married couples file jointly. It helps spouses qualify for a higher standard deduction, in addition to a variety of tax credits not available to single filers. But, if both spouses have a high income, they may be in a lower tax bracket if they file separately. If one spouse received substantial medical care in a given year, it may be preferable to file separately to meet the 7.5% threshold for unreimbursed medical expenses.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Accepted organizations 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 organizations
- Any government entities, as long as the funds are meant to benefit the public
- 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 known as 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 consult with an experienced financial adviser for your tax planning in Sunset Hills, MO|With the assistance of a financial adviser in Sunset Hills, MO, they can help put more money in your pocket now while also setting you up for a financially secure retirement.
Tax Planning for Sunset Hills, MO Business Owners
Business owners can use smart tax planning to keep more money in their business. Ways to owe less in taxes when tax planning for your Sunset Hills, MO business include:
- Review 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 have consequences for both your corporate and your individual tax rate.
- Assess the Retirement Plans You Offer Employees —
There are many benefits to offering employees a retirement plan, and reducing your tax liability is chief among them. The "SECURE" Act of 2019 offers new benefits for employers who offer 401(k)s and SIMPLE IRAs with automatic enrollment, so it's recommended to speak to a financial advisor in Sunset Hills, 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 have to significant sums of money annually, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Merely offering more money can lead to higher taxes for you. Talk to your employees about whether or not they would be willing to accept other benefits as part of their compensation, instead of just giving them more money. 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 set up 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 to Work —
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 begin to save in a vehicle such as a ROTH IRA. If both you and your spouse work for 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 subtract transportation expenses from your taxable income. You can make the deduction in two ways:
- Take advantage of 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 figure out if your deduction would be more than the standard mileage rate
- Look into Tax Loss Carryforward —
If you're not able to make certain deductions this year, you may be able to carry them over into another year. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always changing. One benefit of consulting with a professional Sunset Hills, MO tax planner is that they will work with you and the person who prepares your taxes to determine if there are ways to improve your personal and business financial success.
Other services we offer in Sunset Hills, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
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 preparer, and attorney. For help with tax planning, retirement planning, or any other financial services in Sunset Hills, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
