Tax Planning
Tax Planning in Warson Woods, MO. Tax liability is how much taxes you will need to pay to local, state, and federal entities. Even though taxes may be one of the two certainties in life, there are perfectly legal ways you can reduce how much you owe. Tax planning is also key for successful retirement planning. At Correct Capital, we work with Warson Woods, MO individuals, families, and businesses in the Warson Woods, MO area to find creative and proven ways to reduce how much they owe. Call Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us through our website, or read the article below to learn how judicious tax planning can keep more money in your pocket both now and in the future.
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Tax Planning for Warson Woods, MO Individuals and Families
Prudent 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 Warson Woods, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is a no-questions-asked figure that ensures all tax payers have at least some income that won't be taxed. 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 more income that shouldn't be taxed than the above, you can count up each deduction you're eligible for one by one. The downside is that filing will be more complicated, and you have to prove each deduction.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Contributions to a traditional IRA may be fully or partially deductible, and the money is not taxed until you withdraw it. Savings 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 in terms of tax planning. For instance, if you expect your taxes to go up in the future, 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 contribute to a 401(k) plan through your job, you can choose to have earnings 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, plus an extra $6,500 if you're 50 or older. For 2023, you can contribute 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 your contributions there.
- Tax-Loss Harvesting —
If you lose money on the sale of any stocks, bonds, or options, you can use that loss to reduce your taxable capital gains. Tax-loss harvesting is utilized more 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 you may be able to deduct higher losses in 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. Paying property taxes early can also help you reduce your taxable income, and you can pay for a kid's tuition or for career-boosting classes for you early for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS reports that roughly 95% of married couples file jointly. It helps spouses qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. 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 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 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," as long as the funds are used for charity
- Cemetery organizations
- Any U.S. federal, state, local, or Native governments and subdivisions, as long as 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 over 70½, you can make what's called a qualified charitable distribution by transferring no more than $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 donation counts as your required minimum distribution.
When you use a knowledgeable financial adviser for your tax planning in Warson Woods, MO|With the help a financial adviser in Warson Woods, MO, you can not only pay less in taxes this year, but understand how to get further benefits once you retire.
Tax Planning for Warson Woods, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Ways to owe less in taxes when tax planning for your Warson Woods, 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 individually.
- Evaluate 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 recommended to consult a financial advisor in Warson Woods, MO about how those changes affect your tax planning.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While you would have to significant amounts of money per year, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Merely offering more money can result in higher employment tax costs. Talk to your employees about whether or not they would be willing to accept other benefits as part of their compensation, instead of just rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also set up accountable plans to reimburse employees for certain expenses like travel, meals, or entertainment without counting the reimbursement as income.
- Have Your Family Work For The Business —
Your kids can work for you tax-free on income up to $12,000, and you can help them begin to save in a vehicle 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 means 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
- Consider 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.
Congress are always making new tax laws for businesses, or adjusting old ones. A key advantage of consulting with a professional Warson Woods, MO tax planner is that they will work with you and your tax professional to identify if there are ways to improve your personal and business financial success.
Other services we offer in Warson Woods, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Warson Woods, MO | Correct Capital Wealth Management
At Correct Capital, our Warson Woods, MO financial advisors know strong financial health is essential 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 Warson Woods, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial needs in Warson Woods, MO, call Correct Capital today at 877-930-4015 or contact us online.
