Reduce Your Tax Liability With Correct Capital's Financial Advisors in Tower Grove, MO
Tax Planning in Tower Grove, MO. Tax liability is how much you owe in taxes to local, state, and federal entities. While Uncle Sam will always collect 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 retirement of your dreams. At Correct Capital, we partner with local Tower Grove, MO individuals, families, and businesses to find creative and proven strategies for reducing their tax liability. Call Correct Capital's financial and fiduciary advisors today at 314-930-401(k), contact us online, or read on to discover how diligent tax planning can benefit you.
Tax Planning for Tower Grove, MO Individuals and Families
Smart tax planning can help individuals and families put more in their retirement accounts and have extra money for the short-term. Ways to reduce your tax liability when tax planning in Tower Grove, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat figure 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 have to prove each deduction.
- 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 age, income, and other factors will determine what may be better for you in terms of tax planning. For instance, if you expect your taxes to go up down the road, 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 contribute to a 401(k) plan with your employer, you can choose to defer income from your paycheck and have it placed directly in your 401(k). 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 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 lose money on the sale of any securities, you can offset the amount of capital gains tax you would be liable for if other securities sold at a profit. This strategy 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 you may be able to deduct higher losses down the road.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, you can deduct those that are higher than 7.5% of your adjusted gross income. Paying property taxes early can also lead to deductions, 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 —
The IRS reports that roughly 95% of married couples file jointly. It's the only way to qualify for certain tax credits and reductions. But, if both spouses have a high income, they may be in a lower tax bracket if they file separately. 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.
- Contribute 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 for 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 organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as the funds are for public use
- Often, a Canadian, Mexican, or Israeli organization, as long as the organization meets the criteria for a charity under United States law
If you deposit money in a Donor-Advised Fund, you can get a tax reduction by putting money into it now, while still being able to wait to decide how the funds will get distributed in the future.
If you are older than 70½, you can make what's known as a qualified charitable distribution by transferring a maximum of $100,000 a year from a traditional IRA directly to a non-profit organization without having to pay taxes on it. If you are 72 or older, that transfer qualifies as your required minimum distribution.
When you use an experienced financial adviser for your tax planning in Tower Grove, MO|With the assistance of a financial adviser in Tower Grove, MO, they can help put more money in your pocket now while also setting you up for a financially secure retirement.
Tax Planning for Tower Grove, MO Businesses
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:
- 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 affect both your corporate and your individual tax rate.
- Review 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 meet with a financial advisor in Tower Grove, MO about how those changes affect your tax planning.
a good idea if you and your employees are both higher-earning. While you must significant sums of money annually, the tax benefits are high.
- 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 willing to accept other benefits rather than just giving them a higher paycheck. Examples that could help reduce your tax liability are medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, sick leave, or paying for career-boosting courses.
You can also set up accountable plans to pay employees back for business expenses without counting the reimbursement as income.
- Put Your Family On the Payroll —
Children can work for you tax-free on income up to $12,000, and you can help them start saving for retirement 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.
- Buy a Company Vehicle —
Depending on the specifics of your business, you and your employees may be able to use a company vehicle and subtract transportation costs from your taxable profits. There are two different ways of deducting those expenses:
- Take advantage of the standard mileage rate to deduct 58.5 cents per mile (for January to June in 2022) or 62.5 cents per mile (for July to December in 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and determine whether those allow you to deduct more than the standard mileage rate would have
- Consider Carryover Deductions —
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.
Congress are always making new tax laws for businesses, or changing old ones. A key benefit of working with a knowledgeable Tower Grove, MO tax planner is that they will work with you and the person who prepares your taxes to discover if there are ways to improve your long-term financial success.
Other services we offer in Tower Grove, MO include:
- Small Business Retirement Plans
- Social Security Consultants Near Me
- Retirement Calculator
- Retirement Planning
- Rollover 401(k)
- Wealth Management
- 401k Companies
- Financial Advisor
- Asset Management
Tax Planning in Tower Grove, MO | Correct Capital Wealth Management
At Correct Capital, our Tower Grove, MO financial advisors know strong financial health is key 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, it's important to put a team around you that will help, like your Tower Grove, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Tower Grove, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.