Tax PlanningReduce Your Tax Liability With Correct Capital's Financial Advisors in Swansea, IL
Tax Planning in Swansea, IL. Tax liability refers to how much you owe in taxes to local, state, and federal entities. While taxes may be one of the two certainties in life, there are perfectly legal 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 Swansea, IL individuals, families, and businesses in the Swansea, IL area to find creative and proven strategies for reducing their tax liability. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, reach out online, or read the article below to discover how diligent tax planning can benefit you.
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Tax Planning for Swansea, IL Individuals and Families
Prudent tax planning is essential for individuals and families who want to put more in their retirement accounts and have extra money for the short-term. Ways to reduce how much you owe when tax planning in Swansea, IL are:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked amount that you can deduct from your taxable income. 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 itemize your return. The downside is that it will take longer to fill out your return, and you have to prove each deduction.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Contributions to a traditional IRA can be deducted from your taxable income, and you pay taxes on it when you withdraw it. Roth IRA contributions do not affect your taxable income, but the money grows tax free. Your unique situation will determine what may be better for you for your tax planning. For instance, if you anticipate being in a higher tax bracket in the future, 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 have 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 contribute 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 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 lose money on the sale of any stocks, bonds, or options, 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 usually 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 unreimbursed medical expenses, you can write off those that exceed 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 —
The IRS reports that roughly 95% of married couples file jointly. It helps spouses qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. But, if both spouses have considerable earnings, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, it may be preferable to file separately to qualify for the 7.5% limit for medical deductions.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying organizations include:
- Non-profit organizations that are religious, scientific, educational, or for 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 organizations
- Any government entities, under the condition that the funds are for public use
- Often, a Canadian, Mexican, or Israeli organization, as long as the organization would have been organized as a charity under U.S. law
If you open 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 referred to as a qualified charitable distribution by transferring no more than $100,000 a year from a traditional IRA directly to a charity tax-free. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you use a knowledgeable financial adviser for your tax planning in Swansea, IL|With the assistance of a financial planner in Swansea, IL, they can help put more money in your pocket now while also setting you up for a financially secure retirement.
Tax Planning for Swansea, IL Businesses
Business owners can use smart tax planning to keep more money in their business. Some things to consider when tax planning for your Swansea, IL 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 both your corporate and your individual tax rate.
- Review the Retirement Plans You Offer Employees —
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 401(k)s and SIMPLE IRAs with automatic enrollment, so it's likely in your best interest to meet with a financial advisor in Swansea, IL about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While a business owner would need to significant amounts of money each year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Just offering more money can lead to higher taxes for you. See if your employees would be open to fringe benefits rather than just giving them more money. Examples that could help reduce your tax liability are medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, more paid time off, or paying for courses that help in their career.
You can also set up accountable plans to reimburse employees for business expenses 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 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 —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and subtract transportation costs from your taxable income. There are two different means of deducting those expenses:
- 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 the last half of 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and figure out whether those allow you to deduct more than the standard mileage rate would have
- Consider Tax Loss Carryover —
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.
Tax laws for businesses are always changing. One advantage of consulting with a professional Swansea, IL tax planner is that they will work with you and your tax professional to identify if there are ways to improve your long-term financial success.
Other services we offer in Swansea, IL include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Swansea, IL | Correct Capital Wealth Management
At Correct Capital, our Swansea, IL tax planners know how important the financial health of your family or business is, both now and in the future. That is why we hold ourselves to the fiduciary standard: we are legally and ethically bound to do what's best for you and only you. With tax law always changing, it's important to put a team around you that will help, like your Swansea, IL financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial services in Swansea, IL, call Correct Capital today at 877-930-4015 or contact us online.