Tax Planning
Tax Planning in Weldon Spring, MO. Tax liability refers to how much taxes you pay each year to local, state, and federal authorities. Even though Uncle Sam will always collect some portion 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 local Weldon Spring, MO individuals, families, and businesses to find creative and proven ways to reduce their tax burden. Call Correct Capital's financial planners and fiduciary advisors today at 877-930-4015, reach out through our website, or read on to see how judicious tax planning can keep more money in your pocket both now and in the future.
Tax Planning for Weldon Spring, MO Individuals and Families
Smart tax planning can help individuals and families put more in their retirement accounts and afford them more money for both now and the near future. Some things to take advantage of when tax planning in Weldon Spring, 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 your deductible income is more than the above, you can count up each deduction you're eligible for individually. 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 your savings are taxed. Contributions to a traditional IRA may be fully or partially deductible, and you pay taxes on it when you withdraw it. Savings put into a Roth IRA do not affect your taxable income, but the money grows tax free. Your age, income, and other factors will determine what may be better for you in terms of tax planning. For example, if you anticipate being in a higher tax bracket down the road, you can convert money from a traditional IRA to a Roth IRA to pay taxes on the conversation, while allowing the money to grow tax-free.
If you contribute to a 401(k) plan with your employer, you can choose to defer income from your paycheck and have it placed directly in your 401(k). You can place 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 deposit up to $22,500 or $30,000.
If you're self-employed, you can open up an individual retirement plan, like a One-Participant 401(k) Plan, and you can deduct the savings you put there from your taxable income.
- 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. 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 medical expenses your insurance didn't cover, you can write off those that exceed 7.5% of your adjusted gross income. Paying property taxes early can also help you reduce your taxable income, 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 for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
The IRS says that roughly 95% of married couples choose to file joint tax returns. It helps couples qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. However, if both spouses are higher-earning individuals, they may be in a lower tax bracket if they file separately. If one spouse received considerable medical treatment in a given year, it may be preferable to file separately to qualify for the 7.5% limit for medical deductions.
- Contribute to Charity —
You can deduct up to 60% of your adjusted gross income via charitable donations. 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," as long as the donations are used for charity
- Cemetery organizations
- Any government entities, 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 qualify as a charity under U.S. law
If you open 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 over 70½, you can make what's referred to as 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 counts as your required minimum distribution.
When you consult with a knowledgeable financial planner for your tax planning in Weldon Spring, MO|With the help a financial adviser in Weldon Spring, MO, you can not only pay less in taxes this year, but understand how to get further benefits once you retire.
Tax Planning for Weldon Spring, MO Businesses
Business owners can use effective tax planning to retain more money in their business. Some things to consider when tax planning for your Weldon Spring, MO business include:
- Assess 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 have consequences for both your corporate and your individual tax rate.
- Review Your Employees' Employer-Sponsored Retirement Plans —
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 consult a financial advisor in Weldon Spring, MO about how those changes affect your tax planning.
For higher-earning business owners with higher-earning employees, consider a Cash Balance Pension Plan. While a business owner must contribute several hundred thousand dollars annually, the tax benefits are high.
- Consider Fringe Benefits For Your Employees —
Increasing your employees' wages 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, help with childcare costs, transportation reimbursement, meals, more paid time off, or paying for courses that help in their career.
You can also set up accountable plans to reimburse employees 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 like a ROTH IRA. If both you and your spouse work for 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 income. There are two different ways of deducting those costs:
- Take advantage of 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 figure out if your deduction would be more than the standard mileage rate
- Consider Carryover Deductions —
If you're not able to make certain deductions this year, you may be able to carry them over into subsequent years. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Tax laws for businesses are always in flux. One benefit of consulting with an experienced Weldon Spring, 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 Weldon Spring, 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
Tax Planning in Weldon Spring, MO | Correct Capital Wealth Management
At Correct Capital, our Weldon Spring, 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; you will only hear recommendations that are independent, objective, and unbiased. With tax law always changing, it's important to put a team around you that will help, like your Weldon Spring, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Weldon Spring, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
