7 Tax Planning Tips for Missouri Residents

2. 7 Tax Planning Tips for Missouri Residents

3. (1) Know Your Filing Status With tax season coming up, it’s important to get started on your taxes as soon as possible and take advantage of the time you have now. If you’re in Missouri, here are seven tax planning tips that will help you lower your tax bill this year and help free up more of your income to put towards other things next year. Don’t wait until the last minute, or you could end up paying more than you need to! The first step in tax planning is knowing your filing status. This is because your filing status determines which tax bracket you will fall into and how much tax you will owe. For example, if you are married and file a joint return, you will usually have a lower tax liability than if you were to file as a single. There are five main filing statuses: single, head of household, married filing jointly, married filing separately, and widow(er) with dependent child. Single filers include anyone who isn’t married and doesn’t qualify for any other filing status. Head of Household filers typically live with a qualifying person but don’t meet the age requirement to be classified as an Elderly or Disabled Single Taxpayer (i.e., someone who is 65 years old or older). Married Filing Jointly filers are spouses who want to combine their incomes and their tax liabilities.

4. (2) Maximize Your Deductions One way to save on taxes is to maximize your deductions. If you own a business, be sure to deduct business expenses like office supplies and mileage. You can also deduct charitable donations and medical expenses. If you have a home office, you may be able to deduct a portion of your rent or mortgage interest. Talk to your accountant about other deductions you may be eligible for. For example, if you are retired, you might want to explore the benefits of tax-deferred retirement accounts such as IRAs or 401(k)s. (3) Check Out The Standard Deduction Amount The first step in tax planning is to check out the standard deduction amount. The standard deduction is a set amount that you can deduct from your income. For Missouri residents, the standard deduction is $5,000. This means that if you have an income of $50,000, you would only be taxed on $45,000. Even though this is helpful, it may not make sense for every person or family.

5. (4) Document Other Expenses You should also consider whether or not itemizing deductions will be beneficial and compare the two options before deciding what works best for you. 1. In addition to documenting your income, you’ll also want to keep track of any other expenses that could be tax deductible. This includes things like business expenses, charitable donations, and medical expenses. 2. Keep in mind that not all expenses are created equal when it comes to taxes. For example, business expenses are generally more tax deductible than personal expenses. 3. When in doubt, it’s always best to consult with a tax professional to see if an expense is tax deductible. 4. The IRS has published a list of deductions that can be found. 5. You can read more about the rules for deductions. 6. Keep in mind that you don’t have to take the standard deduction! If you have substantial itemized deductions, taking the standard deduction may end up costing you money!

6. (5) Keep Close Track Of Sales Taxes In Missouri, the state sales tax is 4.225 percent. That’s in addition to any local sales taxes, which can range from 0.5 percent to 2 percent. So if you’re selling products or services in the state, it’s important to keep close track of your sales taxes. Here are a few tips to help you out: 1) If you’re self-employed and sell goods or services in Missouri, report your income and business expenses on Schedule C. 2) If you’re an employee and receive income other than wages, such as bonuses or commissions, use Form 1040EZ. 3) Use Form 8917 to figure the tax on non-qualified deferred compensation items that aren’t subject to Social Security and Medicare taxes. 4) Your employer may withhold federal income tax at a different rate than what you’ll owe when you file your return. 5) You may need to make estimated tax payments during the year if these three conditions apply: You expect more than $1,000 in tax deductions and credits this year; You don’t have enough withholding (income tax taken out of each paycheck); Your withholding plus expected tax credits equals less than 90% of your total estimated 2018 tax liability.

7. (6) Look Into Tax Credits As a Missouri resident, you may be eligible for certain tax credits. Doing some research and consulting with a tax professional can help you take advantage of these credits and save money on your taxes. One credit that may apply to you is the Earned Income Tax Credit (EITC). In addition to the federal tax credit, many states offer their versions of this credit. A tax professional can determine if this applies to you and if so will guide you through the process. Another tax credit available in Missouri is the Homestead Tax Credit which provides property tax relief for homeowners who are at least 65 years old or have disabilities. Another great way to plan for your taxes as a Missouri resident is to use estimated payments throughout the year instead of waiting until April when it’s due. If you make monthly estimated payments, you’ll only need one large payment instead of 12 small ones in April. (7) Choose The Right Retirement Plan When it comes to tax planning in Missouri, one of the most important things you can do is choose the right retirement plan. There are a few different options available, and each has its own set of pros and cons.

8. You’ll need to consider your financial situation and goals before making a decision, but here are a few things to keep in mind A 401(k) provides an employer match, which could be worth as much as 25% on top of what you put in yourself. It also offers pre-tax savings that could help lower your tax bill. A traditional IRA gives you tax-deferred growth, which means that any earnings will not be taxed until they’re withdrawn at retirement age when they’re no longer subject to taxation. A Roth IRA offers tax-free withdrawals once you reach retirement age if certain criteria are met. But you must pay taxes on all contributions made beforehand. If this is something you’re willing to take on, then the benefits could make up for it over time. Be Aware of Tax Brackets: One key point in tax planning Missouri residents should know about is how income brackets work. Your tax bracket defines how much tax you’ll owe on every dollar earned until your income reaches the next bracket.

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