Tax Planning
Tax Planning in Wentzville, MO. Tax liability refers to how much taxes you pay each year to local, state, and federal governments. While taxes may be one of the two certainties in life, there are perfectly legal ways to reduce how much money you have to pay. Tax planning is also important to planning the retirement of your dreams. At Correct Capital, we partner with Wentzville, MO individuals, families, and businesses in the Wentzville, MO area to find creative and proven strategies for reducing how much they owe. Speak to Correct Capital's financial and fiduciary advisors today at 877-930-4015, contact us online, or read the article below to learn how prudent tax planning can benefit you.
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Tax Planning for Wentzville, MO Individuals and Families
Smart 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 Wentzville, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar figure 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 count up each deduction you're eligible for one by one. The disadvantage is that doing your taxes takes longer, and you have to prove each deduction.
- Evaluate 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. Money put into a Roth IRA are not deductible, but you will not be taxed on the withdrawal, as long certain requirements are met. Your unique situation will determine whether a Traditional or Roth IRA is preferable for your tax planning. For example, if you expect your taxes to go up in the future, you can convert savings 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 earnings 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 as much as $22,500 with an extra $7,500.
If you're self-employed, there are also retirement plans available, like 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 securities at a loss, you can offset the amount of capital gains tax you would have to pay if other securities sold at a profit. This strategy 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 additional losses can be carried over into future years.
- Consider Paying Next Year's Bills Now —
If you have medical expenses your insurance didn't cover, you can deduct 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 in order to qualify for a Lifetime Learning Credit.
- If Married, Filing Jointly or Separately —
More than 9 out of 10 married couples file jointly. It's the only way to qualify for certain tax credits and reductions. 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 be preferable 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. Accepted organizations include:
- 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 companies
- Any U.S. federal, state, local, or Native governments and subdivisions, under the condition that the donations are for public use
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization meets the criteria for a charity under United States 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 at least 70½ years of age, 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 transfer counts as your required minimum distribution.
When you consult with an experienced financial planner for your tax planning in Wentzville, MO|With the assistance of a financial planner in Wentzville, MO, you can not only reduce your tax liability this year, but plan out your taxes into retirement.
Tax Planning for Wentzville, MO Businesses
Business owners can use smart tax planning to retain more money in their business. Some things to consider when tax planning for your Wentzville, MO business include:
- Review How Your Business Is Structured —
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 how much you pay in taxes both as a business and individually.
- 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 changed rules for creating and maintaining retirement plans for both small and large employers, so it's recommended to consult a financial advisor in Wentzville, 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 you must contribute several hundred thousand dollars annually, the tax saving can be significant.
- Consider Fringe Benefits For Your Employees —
Only offering more money can result in higher employment tax costs. Ask your employees if they would be willing to accept other benefits as part of their compensation, instead of just rewarding them with a higher paycheck. Examples that could help reduce your tax liability are medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, family or medical leave, or continuing education reimbursement.
You can also use accountable plans to reimburse employees for certain expenses like travel, meals, or entertainment without having to report them as employee income.
- Have Your Family Work For The Business —
Children can work for you tax-free on income up to $12,000, and you can help them begin to save in a vehicle such as a ROTH IRA. If your spouse works in the business, you can double your retirement plan contributions.
- Use a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and 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 January to June in 2022) or 62.5 cents per mile (for July to December in 2022); or
- Document 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 changing. One benefit of working with a knowledgeable Wentzville, MO tax planner is that they will work with you and the person who prepares your taxes to discover if there are ways to improve your personal and business financial success.
Other services we offer in Wentzville, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Wentzville, MO | Correct Capital Wealth Management
At Correct Capital, our Wentzville, MO tax planners 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, it's important to put a team around you that will help, like your Wentzville, MO financial advisor, tax preparer, and attorney. For help with tax planning, retirement planning, or any other financial needs in Wentzville, MO, call Correct Capital today at 877-930-4015 or contact us through our website.
