Tax Planning
Tax Planning in Webster Groves, MO. Tax liability is how much taxes you pay each year to local, state, and federal authorities. Even though Uncle Sam will always collect some percentage of your earnings or profits, there are perfectly legal ways to reduce how much money you have to pay. Tax planning is also essential for successful retirement planning. At Correct Capital, we partner with Webster Groves, MO individuals, families, and businesses in the Webster Groves, MO area to find creative and time-tested ways to reduce how much they owe. Call Correct Capital's financial planners and fiduciary advisors today at 314-930-401(k), reach out online, or read the article below to see how prudent tax planning can keep more money in your pocket both now and in the future.
Tax Planning for Webster Groves, MO Individuals and Families
Diligent tax planning can help individuals and families increase their retirement savings and have extra money for the short-term. Ways to reduce your tax liability when tax planning in Webster Groves, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount that ensures all tax payers have at least some income that won't be taxed. 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 count up each deduction you're eligible for one by one. The downside is that doing your taxes takes longer, and you have to prove each deduction.
- Evaluate Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how they affect your taxes. Contributions to a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Money put into a Roth IRA are not deductible, 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 example, if you expect your taxes to go up down the road, you can move funds from a traditional IRA to a Roth IRA to pay taxes on the conversation, and enjoy tax-free withdrawals when you need the money in retirement.
If you have 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, or up to $27,000 if you're 50 or older. For 2023, you can contribute as much as $22,500 or $30,000.
If you're self-employed, 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 sell securities at a loss, 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 often 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 the future.
- Consider Paying Next Year's Bills Now —
If you have unreimbursed medical expenses, you can deduct those that are greater 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 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 —
More than 9 out of 10 married couples choose to file joint tax returns. It helps spouses qualify for a higher standard deduction, in addition to a variety of tax credits not available to single filers. However, if both spouses have a high income, 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 qualify for the 7.5% threshold for unreimbursed medical expenses.
- Donate to Charity —
You can deduct up to 60% of your adjusted gross income when donating to certain organizations. Accepted organizations include:
- 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 donations are used for charity
- Cemetery companies
- Any government entities, under the condition that 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 deposit money in a Donor-Advised Fund, you can deduct a bulk amount 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 old, you can make what's called a qualified charitable distribution by transferring a maximum of $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 qualifies as your required minimum distribution.
When you use an experienced 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 plan out your taxes into retirement.
Tax Planning for Webster Groves, 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 Webster Groves, 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 affect how much you pay in taxes both as a business and personally.
- Review the Retirement Plans You Offer Employees —
There are many benefits to offering employees a retirement plan, and reducing your tax liability is chief among them. The "SECURE" Act of 2019 changed rules for creating and maintaining retirement plans for both small and large employers, so it's recommended to meet with a financial advisor in Webster Groves, MO about how they may apply to your business.
a good idea if you and your employees are both higher-earning. While you would have to contribute several hundred thousand dollars per year, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Increasing your employees' wages can lead to higher taxes for you. Talk to your employees about whether or not they would be open to fringe benefits rather than just rewarding them with more money. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, sick leave, or continuing education reimbursement.
You can also set up accountable plans to reimburse employees for business expenses without counting the reimbursement as income.
- Put Your Family On the Payroll —
If you get your children on the payroll, 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 like 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. There are two different ways of deducting those expenses:
- 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 Tax Loss Carryover —
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.
US lawmakers are always making new tax laws for businesses, or adjusting old ones. One benefit of consulting with a professional Webster Groves, MO tax planner is that they will work with you and the person who prepares your taxes to determine if there are ways to improve your long-term 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
- Small Business Retirement Plans
- Social Security Consultants Near Me
Tax Planning in Webster Groves, MO | Correct Capital Wealth Management
At Correct Capital, our Webster Groves, MO financial advisors know strong financial health is essential to your overall success. 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 Webster Groves, MO financial advisor, tax preparer, and attorney. For help with tax planning, asset management, or any other financial services in Webster Groves, MO, call Correct Capital today at 314-930-401(k) or contact us through our website.
