Tax PlanningReduce Your Tax Liability With Correct Capital's Financial Advisors in University City, MO
Tax Planning in University City, MO. Tax liability is how much taxes you will need to pay to local, state, and federal governments. While Uncle Sam will always collect some percentage of your earnings or profits, there are perfectly legal ways to reduce your tax liability. 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 time-tested ways to reduce how much they owe. Speak to Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, reach out through our website, or read the article below to learn how judicious tax planning can benefit you.
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Tax Planning for University City, MO Individuals and Families
Smart tax planning can help individuals and families increase their retirement savings and afford them more money for both now and the near future. Some things to take advantage of when tax planning in University City, MO 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, the standard deductions are:
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 doing your taxes takes longer, and you have to prove each deduction.
- Evaluate 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 the money is not taxed until you withdraw it. Roth IRA contributions are not deductible, but you will not be taxed on the withdrawal, as long certain requirements are met. Your unique situation will determine which type of account is preferable in terms of tax planning. For instance, if you anticipate being in a higher tax bracket down the road, you can move 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 contribute to 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 deposit up to $22,500 or $30,000.
If you're have freelance income, there are also retirement plans available, like a One-Participant 401(k) Plan, and you can deduct the money you put there from your taxable income.
- Tax-Loss Harvesting —
If you sell securities at a loss, you can offset the amount of capital gains tax you would have to pay if other securities sold at a profit. This strategy is more common with short-term capital gains, as the tax rate is typically higher than long-term. The maximum deductible amount is $3,000 per year, but you may be able to deduct higher losses in the future.
- 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 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 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's the only way to qualify for certain tax credits and reductions. But, if both spouses have substantial 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 meet the 7.5% threshold for medical deductions.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. Qualifying charities 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 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 for public use
- In many cases, a Canadian, Mexican, or Israeli organization, under the condition that the organization would have been organized as a charity under U.S. 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 at least 70½ years old, 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 non-profit organization tax-free. If you are 72 or older, that transfer counts as your required minimum distribution.
When you use an experienced financial planner for your tax planning in University City, MO|With the assistance of a financial adviser in University City, MO, you can not only reduce your tax liability this year, but plan out your taxes into retirement.
Tax Planning for University City, MO Business Owners
With diligent tax planning, business owners can keep as much of their profits as possible. Ways to owe less in taxes when tax planning for your University City, MO business include:
- Evaluate How Your Business Is Structured —
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 have consequences for how much you pay in taxes both as a business and personally.
- Assess Your Employees' Employer-Sponsored Retirement Plans —
Offering retirement plans not only attracts and retains talent, but it also allows you to deduct contributions. 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 University City, MO about how they may apply to your business.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While you would have to significant amounts of money each year, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages can result in higher employment tax costs. See if your employees would be willing to accept other benefits as part of their compensation, instead of just giving them more money. Examples that could help reduce your tax liability are medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, sick leave, or paying for courses that help in their career.
You can also use accountable plans to pay employees back for business expenses without having to report them as employee income.
- Have Your Family Work For The Business —
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.
- Have 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. You can make the deduction in two ways:
- Use the standard mileage rate to deduct 58.5 cents per mile (for January to June in 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 determine whether those allow you to deduct more than the standard mileage rate would have
- Look into Carryover Deductions —
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.
Congress are always making new tax laws for businesses, or changing old ones. A key advantage of working with a knowledgeable University City, MO tax planner is that they will work with you and your tax professional to discover if there are ways to improve your personal and business 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
Tax Planning in University City, MO | Correct Capital Wealth Management
At Correct Capital, our University City, MO tax planners know strong financial health is key to your overall success. That's why we give our I.O.U. promise; all the advice we give you will be 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, retirement planning, or any other financial needs in University City, MO, call Correct Capital today at 877-930-4015 or contact us online.