Mid-Year Tax Moves That Can Save You Money Before Year-End
Many taxpayers wait until November or December to think about tax planning. By then, however, many of the best opportunities have already passed. Mid-year is an ideal time to review your financial picture and make adjustments that can reduce your tax liability, improve cash flow, and help you avoid unpleasant surprises when you file your return.
Here are several tax-smart strategies to consider before the second half of the year is over.
1. Review Your Income and Tax Withholding
If you've received a raise, changed jobs, retired, started collecting Social Security, or have significant investment income, your tax situation may have changed considerably. Reviewing your projected income now allows you to adjust payroll withholding or estimated tax payments before penalties become an issue.
2. Maximize Retirement Contributions
If you're not on track to maximize contributions to your 401(k), 403(b), SEP IRA, SIMPLE IRA, or IRA, now is the perfect time to increase your contributions. Not only can this strengthen your retirement savings, but traditional retirement plan contributions may also reduce your current taxable income.
3. Harvest Investment Losses
With markets continuing to experience periods of volatility, some investments may currently be worth less than their purchase price. Selling those positions to realize capital losses can offset capital gains and potentially reduce taxable income. If done thoughtfully, you can often reposition your portfolio while improving tax efficiency.
4. Review Capital Gains Before Selling Assets
Before selling stocks, mutual funds, real estate, or a business interest, understand the tax consequences. Coordinating the timing of gains with available losses or lower-income years can significantly reduce the taxes owed.
5. Evaluate Roth Conversion Opportunities
A Roth IRA conversion may make sense if your income is temporarily lower than normal or if you expect tax rates to rise in the future. Converting during a lower tax bracket allows future qualified growth and withdrawals to be tax-free. Since every situation is unique, careful analysis is essential before making this decision.
6. Don't Forget Required Estimated Tax Payments
Business owners, retirees, investors, and anyone receiving income without withholding should review whether estimated tax payments remain adequate. Underpaying throughout the year can result in IRS penalties even if the balance is paid when the return is filed.
7. Review Charitable Giving Plans
If charitable giving is part of your financial plan, consider whether bunching donations into one year, donating appreciated securities, or using a donor-advised fund could increase your tax benefit while supporting the organizations you care about.
8. Business Owners Should Review Deductions
Mid-year is an excellent time for business owners to review profitability, equipment purchases, retirement plans, vehicle expenses, and other deductible expenditures. Waiting until year-end often leaves fewer planning options available.
9. Check Flexible Spending and Health Savings Accounts
Review your Health Savings Account (HSA) and Flexible Spending Account (FSA) contributions. HSAs provide one of the most valuable tax benefits available—tax-deductible contributions, tax-deferred growth, and tax-free qualified medical withdrawals. FSAs should also be monitored to avoid forfeiting unused funds, depending on your employer's plan.
10. Schedule a Mid-Year Tax Review
Perhaps the most valuable tax strategy is simply taking the time to review your situation before year-end. Changes in income, investments, family circumstances, tax laws, or retirement plans often create planning opportunities that disappear once the calendar turns to January.
The Bottom Line
Tax planning is most effective when it's proactive—not reactive. A mid-year review allows you to identify opportunities while there is still time to act, potentially reducing your tax bill and strengthening your overall financial plan.
If you'd like to discuss strategies tailored to your specific situation, our team is here to help. We'll review your current tax picture, identify planning opportunities, and help you make informed decisions before year-end.
