Tax Planning
Tax Planning in Webster Groves, MO. Tax liability refers to how much taxes you will need to pay to local, state, and federal authorities. 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 to planning the retirement of your dreams. At Correct Capital, we partner with Webster Groves, MO individuals, families, and businesses in the Webster Groves, MO area to find creative and proven ways to reduce how much they owe. Call Correct Capital's tax planners and fiduciary advisors today at 877-930-4015, contact us online, or read the article below to discover how prudent tax planning can benefit you.
Tax Planning for Webster Groves, 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. Some things to take advantage of when tax planning in Webster Groves, 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 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 it will take longer to complete your return, and you will have to document why you are eligible for the deduction when you send your returns.
- Review How You Are Saving For Retirement —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Savings you put into a traditional IRA can be deducted from your taxable income, and the money is not taxed until you withdraw it. Money put into a Roth IRA cannot be deducted from 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 unique situation will determine whether a Traditional or Roth IRA is preferable in terms of tax planning. For instance, if you expect your taxes to go up 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, or as much as $27,000 if you're 50 or older. For 2023, you can deposit as much as $22,500 or $30,000.
If you're have freelance income, you can open up an individual retirement plan, such as a One-Participant 401(k) Plan, and you can deduct the funds you put there from your taxable income.
- Tax-Loss Harvesting —
If you sell stocks, bonds, or options at a loss, you can use that loss to reduce your taxable capital gains. Tax-loss harvesting 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 in future years.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can deduct those that exceed 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 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 says 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 considerable earnings, filing separately may reduce their combined tax liability. If one spouse received considerable medical care in a given year, it may make sense to file separately to meet the 7.5% limit for unreimbursed medical expenses.
- Make Charitable Donations —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Qualifying 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," as long as the donations are used for charity
- Cemetery organizations
- 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 meets the criteria for a charity under United States law
If you start 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 up to $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 consult with a knowledgeable financial planner for your tax planning in Webster Groves, MO|With the assistance of a financial planner in Webster Groves, MO, you can not only reduce your tax liability this year, but understand how to get further benefits once you retire.
Tax Planning for Webster Groves, MO Businesses
With diligent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Webster Groves, MO business include:
- Evaluate 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.
- Evaluate the Retirement Plans You Offer Employees —
Offering retirement plans not only attracts and retains talent, but it also allows you to deduct contributions. The "SECURE" Act of 2019 offers new benefits for employers who offer certain retirement plans, so it may be best to speak to a financial advisor in Webster Groves, MO about how those changes affect your tax planning.
a good idea if you and your employees are both higher-earning. While an employer must 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. Ask your employees if 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 costs, transportation reimbursement, meals, sick leave, or paying for career-boosting courses.
You can also use accountable plans to pay employees back for certain expenses like travel, meals, or entertainment 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 them start saving for retirement through an account like a ROTH IRA. If your spouse works in 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 expenses from your taxable profits. 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 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
- Look into Carryover Deductions —
You're allowed to carryover some deductions into subsequent years. These can include a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. A key benefit of working with a knowledgeable Webster Groves, MO tax planner is that they will work with you and the person who prepares your taxes to identify if there are ways to strengthen your personal and business financial success.
Other services we offer in Webster Groves, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
- 401(k) For Small Business
Tax Planning in Webster Groves, MO | Correct Capital Wealth Management
At Correct Capital, our Webster Groves, MO tax planners 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; all the advice we give you will be independent, objective, and unbiased. With tax law always changing, it's important to put a team around you that will help, like your Webster Groves, MO financial advisor, tax professional, and attorney. For help with tax planning, retirement planning, or any other financial services in Webster Groves, MO, call Correct Capital today at 877-930-4015 or contact us online.
