Reduce Your Tax Liability With Correct Capital's Financial Advisors in Westwood, MO
Tax Planning in Westwood, MO. Tax liability is how much taxes you will need to pay to local, state, and federal entities. While 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 to planning the golden years of your dreams. At Correct Capital, we partner with Westwood, MO individuals, families, and businesses in the Westwood, MO area to find creative and time-tested strategies for reducing their tax liability. Call Correct Capital's financial planners and fiduciary advisors today at 314-930-401(k), contact us online, or read on to discover how judicious tax planning can benefit you.
Tax Planning for Westwood, 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. Ways to reduce how much you owe when tax planning in Westwood, MO are:
- Standard Deduction vs. Itemizing —
The standard deduction is specific dollar amount that reduces the amount of income you are taxed on. In 2022 and 2023, the standard deductions are:
- $12,950 for single filers
- $25,900 for married, filing jointly
- $12,950 for married, filing separately
- $19,400 for head of household
- $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 drawback is that it will take longer to complete your return, 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 can be deducted from your taxable income, and the money is not taxed until you withdraw it. Roth IRA contributions do not affect your taxable income, but the money grows tax free. Your unique situation will determine which type of account is preferable for your tax planning. For instance, if you anticipate have more tax liability in the future, you can transfer funds from a traditional IRA to a Roth IRA to pay taxes on the conversation, while allowing the money to grow tax-free.
If you have 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 up to $27,000 if you're 50 or older. For 2023, you can contribute up to $22,500 or $30,000.
If you're have freelance income, 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 sell stocks, bonds, or options at a loss, you can offset the amount of capital gains tax you would have to pay if other securities sold at a profit. Tax-loss harvesting is utilized more with short-term capital gains, as the tax rate is often higher than long-term. The maximum deductible amount is $3,000 per year, but additional losses can be carried over into 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 for a kid's tuition or for career-boosting classes for you early 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 helps couples qualify for a higher standard deduction, as well as a variety of tax credits not available to single filers. But, if both spouses have considerable earnings, filing separately may reduce their combined tax liability. If one spouse has a lot of medical expenses, 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 via charitable donations. Qualifying charities 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 funds are used for charity
- Cemetery companies
- Any government entities, as long as the funds are for public use
- Often, a Canadian, Mexican, or Israeli organization, under the condition that the organization would qualify as a charity under U.S. law
If you deposit money in a Donor-Advised Fund, you can contribute a large 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 a maximum of $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 transfer counts as your required minimum distribution.
When you use an experienced financial adviser for your tax planning in Westwood, MO|With the help a financial planner in Westwood, MO, you can not only pay less in taxes this year, but plan out your taxes into retirement.
Tax Planning for Westwood, 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 Westwood, 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 have consequences for both your corporate and your individual tax rate.
- Review Your Employees' Employer-Sponsored Retirement Plans —
Offering your employees retirement plans, such as 401(k)s, 403(b)s, and other defined contribution plans is a great way to reduce your tax liability. The "SECURE" Act of 2019 offers new benefits for employers who offer 401(k)s and SIMPLE IRAs with automatic enrollment, so it's recommended to speak to a financial advisor in Westwood, MO about how those changes affect your tax planning.
a good idea if you and your employees are both higher-earning. While a business owner would need to considerable sums of money each year, the tax benefits are high.
- Consider Other Benefits For Your Employees —
Merely offering raises can result in higher taxes for you. See if your employees would be willing to accept other benefits as part of their compensation, instead of just giving them a raise. Common fringe benefits include medical insurance, group life insurance, childcare assistance, transportation reimbursement, meals, more paid time off, or paying for courses that help in their career.
You can also use accountable plans to pay employees back for certain expenses like travel, meals, or entertainment without counting the reimbursement as 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 begin to save in a vehicle 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. You can make the deduction in two ways:
- Use the standard mileage rate to deduct 58.5 cents per mile (for the first half of 2022) or 62.5 cents per mile (for the last six months of 2022); or
- Keep a record of your actual expenses, like maintenance, registration fees, and gas, and determine if your deduction would be more than the standard mileage rate
- Consider Carryover Deductions —
You're allowed to carryover some deductions into another year. Common carryover deductions are a home office deduction, net operating losses, business credits, and capital losses.
Congress are always making new tax laws for businesses, or changing old ones. One benefit of working with a professional Westwood, MO tax planner is that they will work with you and your tax professional to determine if there are ways to improve your long-term financial success.
Other services we offer in Westwood, MO include:
- 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
- Retirement Calculator
- Retirement Planning
Tax Planning in Westwood, MO | Correct Capital Wealth Management
At Correct Capital, our Westwood, MO financial advisors 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, it's important to put a team around you that will help, like your Westwood, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Westwood, MO, call Correct Capital today at 314-930-401(k) or contact us online.