Tax PlanningReduce Your Tax Liability With Correct Capital's Financial Advisors in Wildwood, MO
Tax Planning in Wildwood, MO. Tax liability is how much you owe in taxes to local, state, and federal entities. While taxes may be one of the two certainties in life, The IRS allows for several ways to reduce your tax liability. Tax planning is also essential to planning the golden years of your dreams. At Correct Capital, we partner with Wildwood, MO individuals, families, and businesses in the Wildwood, MO area to find creative and time-tested strategies for reducing their tax liability. Speak to Correct Capital's financial planners and fiduciary advisors today at 877-930-4015, contact us online, or read on to learn how judicious tax planning can keep more money in your account both now and down the road.
Tax Planning for Wildwood, MO Individuals and Families
Smart tax planning can help individuals and families increase their retirement savings and have extra money for the short-term. Some things to consider when tax planning in Wildwood, MO include:
- Standard Deduction vs. Itemizing —
The standard deduction is flat amount 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 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 doing your taxes takes longer, and you will have to document why you are eligible for the deduction when you send your returns.
- Review Your Retirement Accounts —
Roth IRAs and Traditional IRAs differ in how your savings are taxed. Money you put into 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 cannot be deducted from your taxable income, but the money grows tax free. Your age, income, and other factors will determine which type of account is preferable in terms of tax planning. For instance, if you expect your taxes to go up down the road, you can transfer money 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 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, plus an extra $6,500 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 your contributions there.
- Tax-Loss Harvesting —
If you lose money on the sale of any securities, you can offset the amount of capital gains tax you would have to pay if other securities sold at a profit. This strategy is more common with short-term capital gains, as the tax rate is typically 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 unreimbursed medical expenses, you can deduct those that are higher 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 for a kid's tuition or for career-boosting classes for you early 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 get certain tax credits and reductions. However, if both spouses have a high income, filing separately may reduce their combined tax liability. If one spouse received considerable medical treatment in a given year, 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 via charitable donations. Accepted charities 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, as long as the funds 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 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 referred to as 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 counts as your required minimum distribution.
When you use a knowledgeable financial adviser for your tax planning in Wildwood, MO|With the help a financial adviser in Wildwood, MO, you can not only reduce your tax liability this year, but understand how to get further benefits once you retire.
Tax Planning for Wildwood, MO Business Owners
With prudent tax planning, business owners can keep as much of their profits as possible. Some things to consider when tax planning for your Wildwood, MO business include:
- Evaluate 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 affect both your corporate and your individual tax rate.
- Assess the Retirement Plans You Offer Employees —
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 consult a financial advisor in Wildwood, MO about how those changes affect your tax planning.
A Cash Balance Pension Plan may be ideal for higher-earning business owners and employees. While an employer must significant sums of money annually, the tax saving can be significant.
- Consider Other Benefits For Your Employees —
Just offering raises can lead to higher taxes for you. Talk to your employees about whether or not they would be willing to accept fringe benefits as part of their compensation, instead of just giving them a raise. Examples that could help reduce your tax liability are medical insurance, group life insurance, help with childcare costs, transportation reimbursement, meals, more paid time off, 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 counting the reimbursement as income.
- Put Your Family On the Payroll —
Your kids can work for you tax-free on income up to $12,000, and you can help them start saving for retirement through an account like a ROTH IRA. You can double how much you're allowed to put into retirement plans by having your spouse work for the business.
- Use a Company Vehicle —
Depending on the nature of your business, you and your employees may be able to use a company vehicle and subtract transportation costs from your taxable income. 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 if your deduction would be more than the standard mileage rate
- Look into Tax Loss Carryover —
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.
US lawmakers are always making new tax laws for businesses, or changing old ones. One benefit of consulting with an experienced Wildwood, MO tax planner is that they will work with you and your tax professional to discover if there are ways to strengthen your personal and business financial success.
Other services we offer in Wildwood, MO include:
- Succession Planning
- Fiduciary Financial Advisor
- Company 401(k) Plans
- ESOP Advisor
- Self-Employed Retirement Plans
Tax Planning in Wildwood, MO | Correct Capital Wealth Management
At Correct Capital, our Wildwood, MO tax planners 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 act in your best interest. With tax law always changing, it's important to put a team around you that will help, like your Wildwood, MO financial advisor, tax professional, and attorney. For help with tax planning, asset management, or any other financial services in Wildwood, MO, call Correct Capital today at 877-930-4015 or contact us through our website.