Tax Planning
Tax Planning in Warson Woods, MO. Tax liability is how much you owe in taxes to local, state, and federal entities. Even though taxes may be one of the two certainties in life, The IRS allows for several ways to reduce how much money you have to pay. Tax planning is also essential to planning the retirement of your dreams. At Correct Capital, we partner with local Warson Woods, MO individuals, families, and businesses to find creative and proven strategies for reducing their tax burden. Call Correct Capital's financial and fiduciary advisors today at 314-930-401(k), contact us through our website, or read on to see how diligent tax planning can benefit you.
Tax Planning for Warson Woods, MO Individuals and Families
Diligent tax planning is essential for individuals and families who want to increase their retirement savings and have extra money for the short-term. Some things to take advantage of when tax planning in Warson Woods, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat 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 itemize your return. The disadvantage is that doing your taxes takes longer, and you have to prove each deduction.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. 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 do not affect your taxable income, but you will not be taxed on the withdrawal, as long as you are over 59 1/2 and have had the account for at least five years. Your age, income, and other factors will determine which type of account is preferable for your tax planning. For example, 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, while allowing the money to grow tax-free.
If you have 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 contribute 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 up to $22,500 or $30,000.
If you're self-employed, there are also retirement plans available, like a One-Participant 401(k) Plan, and you can deduct your contributions there.
- Tax-Loss Harvesting —
If you sell stocks, bonds, or options at a loss, you can use that loss to reduce your taxable capital gains. This strategy is utilized more 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 in the future.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, 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 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 says that roughly 95% of married couples file jointly. It's the only way to qualify for certain tax credits and reductions. However, if both spouses earn substantial incomes, they may be in a lower tax bracket if they file separately. 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.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying charities are:
- 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, as long as the funds are meant to benefit the public
- Often, a Canadian, Mexican, or Israeli organization, as long as the organization would qualify as a charity under U.S. law
If you open 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 at least 70½ years of age, you can make what's referred to 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 donation counts as your required minimum distribution.
When you consult with an experienced financial planner for your tax planning in Warson Woods, MO|With the help a financial adviser in Warson Woods, MO, they can help put more money in your pocket now while also setting you up for a financially secure future.
Tax Planning for Warson Woods, MO Business Owners
With diligent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Warson Woods, MO business include:
- Review the Structure of Your Business —
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.
- Review 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 may be best to speak to a financial advisor in Warson Woods, 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 a business owner would need to significant sums of money per year, the tax saving can be significant.
- 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 fringe benefits rather than just giving them more money. Examples that could help reduce your tax liability are medical insurance, group life insurance, help with childcare expenses, 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 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 them begin to save in a vehicle 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:
- 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 July to December in 2022); or
- Keep a record of 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
- Look into Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over into another year. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always changing. One benefit 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 strengthen your long-term 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
- 401(k) For Small Business
- Small Business Retirement Plans
- Social Security Consultants Near Me
Tax Planning in Warson Woods, MO | Correct Capital Wealth Management
At Correct Capital, our Warson Woods, MO tax planners know how important the financial health of your family or business is, both now and in the future. 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, 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 services in Warson Woods, MO, call Correct Capital today at 314-930-401(k) or contact us online.
