Reduce Your Tax Liability With Correct Capital's Financial Advisors in Swansea, IL
Tax Planning in Swansea, IL. Tax liability is how much taxes you will need to pay to local, state, and federal authorities. Even though Uncle Sam will always get some portion of your earnings or profits, The IRS allows for several ways you can reduce how much you owe. Tax planning is also important to planning the golden years of your dreams. At Correct Capital, we work with Swansea, IL individuals, families, and businesses in the Swansea, IL area to find creative and time-tested ways to reduce how much they owe. Call Correct Capital's financial and fiduciary advisors today at 314-930-401(k), contact us through our website, or read the article below to learn how judicious tax planning can keep more money in your account both now and down the road.
Tax Planning for Swansea, IL Individuals and Families
Diligent tax planning is essential for individuals and families who want to 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 Swansea, IL include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount that you can deduct from your taxable income. 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 more income that shouldn't be taxed than the above, you can itemize your return. The disadvantage is that it will take longer to fill out your return, and you will have to document why you are eligible for the deduction when you send your returns.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Contributions to a traditional IRA can be deducted from your taxable income, and you pay taxes on it when you withdraw it. Money put into a Roth IRA are not deductible, but the money grows tax free. Your unique situation will determine what may be better for you for your tax planning. For example, if you anticipate have more tax liability in the future, you can convert money from a traditional IRA to a Roth IRA to pay taxes on the conversation, and enjoy tax-free withdrawals when you need the money in retirement.
If you contribute to 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, plus an extra $6,500 if you're at least 50 years old. For 2023, you can deposit as much as $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 the money you put there from your taxable income.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, 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 unreimbursed medical expenses, you can write off those that are greater than 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 child's tuition or for career-boosting classes for you early 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 earn substantial 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 meet the 7.5% threshold for unreimbursed medical expenses.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. Qualifying 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," under the condition that the money are used for charity
- Cemetery organizations
- Any government entities, under the condition that the funds are for public use
- In many cases, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify 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 old, 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 tax-free. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you consult with an experienced financial planner for your tax planning in Swansea, IL|With the help 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 Business Owners
Business owners can use effective tax planning to retain more money in their business. Ways to reduce your tax liability when tax planning for your Swansea, IL business include:
- Evaluate 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.
- Review 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 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 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 have to contribute several hundred thousand dollars each year, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can lead to higher taxes for you. Ask your employees if they would be open to fringe benefits as part of their compensation, instead of just giving them a higher paycheck. Common fringe benefits include medical insurance, group life insurance, help with childcare expenses, transportation reimbursement, meals, more paid time off, or continuing education reimbursement.
You can also use accountable plans to reimburse employees for business expenses 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 start saving for retirement through an account like a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- Use 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. There are two different ways of deducting those costs:
- Use 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 six months of 2022); or
- Document 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
- Look into Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over 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 consulting with an experienced 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:
- Company 401(k) Plans
- ESOP Advisor
- 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)
Tax Planning in Swansea, IL | Correct Capital Wealth Management
At Correct Capital, our Swansea, IL financial advisors 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 Swansea, IL financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Swansea, IL, call Correct Capital today at 314-930-401(k) or contact us through our website.