Tax Planning
Tax Planning in Tower Grove, MO. Tax liability is how much taxes you will need to pay to local, state, and federal governments. Even though taxes may be one of the two certainties in life, The IRS allows for several ways you can reduce how much you owe. Tax planning is also important for successful retirement planning. At Correct Capital, we work with local Tower Grove, MO individuals, families, and businesses to find creative and proven ways to reduce how much they owe. Call Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, reach out online, or read on to see how judicious tax planning can benefit you.
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Tax Planning for Tower Grove, MO Individuals and Families
Diligent tax planning can help individuals and families increase their retirement savings and have extra money for the short-term. Some things to take advantage of when tax planning in Tower Grove, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar amount that ensures all tax payers have at least some income that is not taxable. 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 downside is that it will take longer to complete your return, and you will have to document why you are eligible for the deduction when you send your returns.
- Evaluate How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs both offer tax benefits in different ways. Contributions to a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Roth IRA contributions are not deductible, but the money grows tax free. Your unique situation will determine what may be better for you in terms of tax planning. For example, if you anticipate have more tax liability down the road, you can transfer money from a traditional IRA to a Roth IRA to pay taxes on the transfer, and enjoy tax-free withdrawals when you need the money in retirement.
If you have a 401(k) plan through your work, 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 50 or older. For 2023, you can contribute as much as $22,500 or $30,000.
If you're self-employed, 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 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. 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 for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
More than 9 out of 10 married couples file jointly. It's the only way to qualify for certain tax credits and reductions. However, if both spouses are higher-earning individuals, filing separately may reduce their combined tax liability. If one spouse received substantial medical care in a given year, it may make sense to file separately to qualify for the 7.5% limit for unreimbursed medical expenses.
- Make Charitable Donations —
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 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 funds are used for charity
- Cemetery companies
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the donations are meant to benefit the public
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization meets the criteria for a charity under United States law
If you start a Donor-Advised Fund, you can deduct a bulk amount now, while still being able to wait to decide how the funds will get distributed down the road.
If you are older than 70½, 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 counts as your required minimum distribution.
When you use a knowledgeable financial adviser for your tax planning in Tower Grove, MO|With the help a financial adviser in Tower Grove, MO, they can help put more money in your pocket this year while also setting you up for a financially secure retirement.
Tax Planning for Tower Grove, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Tower Grove, MO 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 have consequences for how much you pay in taxes both as a business and personally.
- Assess 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 changed rules for creating and maintaining retirement plans for both small and large employers, so it's likely in your best interest to speak to a financial advisor in Tower Grove, MO about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While a business owner must significant sums of money each year, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Merely offering raises can result in higher taxes for you. See if your employees would be willing to accept other benefits as part of their compensation, instead of just giving them more money. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or paying for courses that help in their career.
You can also use accountable plans to reimburse employees for certain expenses like travel, meals, or entertainment without counting the reimbursement as income.
- Put Your Family On the Payroll —
If you hire your children, they do not have to pay taxes on their first $12,000 in income, and you can help kick-start their retirement savings through an account such as a ROTH IRA. If both you and your spouse work for 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 subtract transportation expenses from your taxable income. There are two different ways of deducting those costs:
- 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 six months of 2022); or
- Document your actual expenses, like maintenance, registration fees, and gas, and calculate if your deduction would be more than the standard mileage rate
- Consider Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over into subsequent years. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. One benefit of working with an experienced Tower Grove, MO tax planner is that they will work with you and the person who prepares your taxes to identify if there are ways to improve your long-term financial success.
Other services we offer in Tower Grove, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Tower Grove, MO | Correct Capital Wealth Management
At Correct Capital, our Tower Grove, MO 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 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 Tower Grove, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial needs in Tower Grove, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
