Smart Mid-Year Moves to Lower Your Tax Bill
Summer may bring thoughts of vacations and outdoor fun, but it’s also a great time to assess your tax situation. Mid-year tax planning helps you avoid surprises, maximize savings, and take proactive steps that can significantly reduce your bill come April. Whether you’re an individual taxpayer or a small business owner, here are some smart strategies to consider now:
1. Review Your Withholding & Estimated Payments
If your income or deductions have changed since January, now is the time to evaluate your tax withholding or estimated tax payments. Adjustments now can help you avoid penalties and reduce the risk of owing a large balance at tax time.
For employees: Review your Form W-4 and consider updating it if you’ve experienced a significant life change, such as a raise, a new job, or a family change.
For business owners and freelancers: Review your first two quarterly estimated payments (Form 1040-ES) and recalculate if necessary. If you're unsure how quarterly taxes work, check out our guide to estimated tax payments for a quick refresher.
Note: The Q3 payment is due on September 15—make sure it is on your radar.
2. Maximize Retirement Contributions
Tax-deferred retirement contributions remain among the most effective ways to reduce taxable income while building long-term financial security.
Individuals: If your employer offers a retirement plan, such as a 401(k), now is a great time to review your contributions and increase them if possible. Minor adjustments mid-year can make a significant impact by year-end.
Self-employed individuals: If you don’t have any full-time employees (other than a spouse), consider setting up a solo 401(k). It allows for employee and employer contributions, offering significantly higher contribution limits than traditional IRAs and substantial tax savings.
Business owners: If you don’t already offer a retirement plan to your employees, mid-year is a great time to explore your options. A 401(k) plan can be an excellent fit for small businesses, offering flexibility, tax deductions, and the ability to contribute through employer matches or profit-sharing. If you already have a plan, review your contributions and funding strategy to ensure you're maximizing its benefits.
3. Make Use of Tax Credits
Mid-year is an excellent opportunity to assess eligibility for tax credits such as the Child Tax Credit, education credits, or energy-efficient home upgrades. Tracking expenses now can simplify documentation later.
4. Organize Your Records
Staying organized now saves stress later. Keep track of receipts, invoices, charitable donations, and mileage logs. If you use accounting software or a client portal, take some time to tidy up your records and highlight anything that requires review.
5. Schedule a Mid-Year Tax Review
Tax planning isn’t only for the end of the year. A mid-year check-in with your CPA enables us to run projections, recommend strategies tailored to your situation, and make necessary adjustments while there’s still time to act.
We’re Here to Help!
At Carlson Hearne CPA, we believe in proactive, year-round support, not just during tax season. Contact our team today to schedule a mid-year planning session. Smart moves made now can pay off big time later.