Reduce Your Tax Liability With Correct Capital's Financial Advisors in University City, MO
Tax Planning in University City, MO. Tax liability refers to how much taxes you will need to pay to local, state, and federal entities. While Uncle Sam will always collect some percentage of your earnings or profits, The IRS allows for several ways to reduce how much money you have to pay. Tax planning is also important for successful retirement planning. At Correct Capital, we partner with University City, MO individuals, families, and businesses in the University City, MO area to find creative and proven 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 prudent tax planning can benefit you.
Tax Planning for University City, MO Individuals and Families
Diligent 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. Some things to consider when tax planning in University City, MO include:
- 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, 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 your deductible income is more than the above, you can count up each deduction you're eligible for one by one. 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 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. Roth IRA contributions cannot be deducted from your taxable income, but the money grows tax free. Your unique situation will determine whether a Traditional or Roth IRA is preferable in terms of tax planning. For instance, if you anticipate have more tax liability down the road, you can convert funds 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 contribute to 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 place up to $20,500 to a 401(k) in 2022, or up to $27,000 if you're 50 or older. 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 securities, 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. You can deduct up to $3,000 in capital gains losses per year, but you may be able to deduct higher losses down the road.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can deduct those that are higher 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 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 couples qualify for a higher standard deduction, as well as 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 considerable medical treatment in a given year, it may be preferable to file separately to meet the 7.5% threshold for medical deductions.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income via charitable donations. Accepted charities 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 companies
- 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 open a Donor-Advised Fund, you can contribute a bulk amount now for an immediate tax reduction, and recommend how the funds are distributed over the years that follow.
If you are over 70½, you can make what's referred to as a qualified charitable distribution by transferring a maximum of $100,000 a year from a traditional IRA directly to a charity tax-free. If you are 72 or older, that donation counts as your required minimum distribution.
When you consult with an experienced financial planner for your tax planning in University City, MO|With the help a financial adviser in University City, MO, you can not only pay less in taxes this year, but understand how to get further benefits once you retire.
Tax Planning for University City, MO Businesses
Business owners can use smart tax planning to keep more money in their business. Some things to consider when tax planning for your University City, MO business include:
- Evaluate How Your Business Is Structured —
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 personally.
- Evaluate Your Employees' Employer-Sponsored Retirement Plans —
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 certain retirement plans, so it's likely in your best interest to consult a financial advisor in University City, MO about how they may apply to your business.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While you would have to contribute several hundred thousand dollars annually, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can lead to higher taxes for you. See if your employees would be willing to accept other benefits rather than just giving them more money. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or paying for courses that help in their career.
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 —
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. You can double how much you're allowed to put into retirement plans if your spouse work for the business.
- 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 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 July to December in 2022); or
- Document your actual expenses, like maintenance, registration fees, and gas, and calculate whether those allow you to deduct more than the standard mileage rate would have
- Look into Tax Loss Carryover —
You're allowed to carryover some deductions into another year. 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 consulting with an experienced University City, MO tax planner is that they will work with you and the person who prepares your taxes to discover if there are ways to strengthen your long-term financial success.
Other services we offer in University City, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- 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
Tax Planning in University City, MO | Correct Capital Wealth Management
At Correct Capital, our University City, 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, you need a team around you that will help, like your University City, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial services in University City, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.