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7 Tips for a Mid-Year Tax Check-Up

If you’re always scrambling to finish your taxes by the end of the year, it may be time to change your strategy.

According to Gil Charney, director of H&R Block’s Tax Institute, summer is the perfect time of year to check in on your finances and ward off any surprises when it comes time to file.

“Midyear is the perfect time to make sure you’re maximizing any potential tax benefit and reducing any additional tax liability that result from changes in your life,” Charney told Fidelity Investments.

Here are the 7 things you should tackle for your mid-year tax check-up.

1. Take Stock of Life Changes

Did you get that big raise you’ve been waiting on? Have another child? Switch employers? Buy a new home?

Any one of these big life changes could be enough to impact your taxes, from deductions to withholding - and it’s more common as you get older.

“When you're young, the only tax matters are relating to simple wage income and educational expenditures,” Crystal Stranger, president of 1st Tax Inc. explained to Reader’s Digest.

“But as life progresses family and business lives filled with various investments tend to create more complex tax pictures,” she added.

If your financial situation looks wildly different this year from last, you may want to consider hiring a professional to help you weather the transition, suggests personal finance writer Kelly Phillips Erb.

“Would a contribution to your IRA help reduce your tax bill? Do you need to file a separate tax return for your children? Would splitting the sale of your business over a number of years reduce the hit to your family?” asks Erb at Forbes. “These are the kinds of questions that are generally best answered by a professional.”

2. Double Check Your Withholding

If you received a sizeable refund last year, it might be worth checking how much your employer withholds from your paycheck, say the experts at H&R Block.

“The IRS reports that millions of American workers have far more taxes withheld from their pay than is required each year,” writes tax attorney Lynn Ebel at the company’s blog.

“This results in a tax refund when you file. Some people use their tax refund as a way of forced saving. A second group wants to have the minimum amount of money withheld from their pay so they get to keep more with each paycheck,” she adds.

In general, most accountants will recommend that you run the numbers on your income in the summer to avoid potential surprises or hiccups when filing in the spring.

Need more help estimating your taxes for 2017? Check out this post from Mark Steber, the chief tax officer of Jackson Hewitt, over at Huffington Post.

3. Maximize Your Credits & Deductions

Here’s where understanding how life changes affect your taxes really pays off.

Check to see if your eligibility has changed regarding major expenses, especially around student loan deductions, joint filing deductions for newly married couples, or childcare.

“If you bought a house, you can now deduct your mortgage interest and your property taxes,” explains Lynn Asinof at the Boston Globe.

“If you welcomed a new child, you’ll also welcome an additional tax exemption [...]. If you got married or divorced, your filing status will change,” Asinof adds.

Of course, as you move up the income ladder, your tax bracket may also change - meaning you may owe more taxes than last year.

That’s why it’s so important to check your earnings against last year’s return now - instead of in April.

4. Review Changes in Tax Law

Tax law is always changing, which can make preparing your taxes that much more of a challenge come December.

Here are the major areas of tax law to keep your eye on as the year progresses:

    • Inflation: Every year, tax brackets are adjusted to account for inflation, which can impact how much income tax you may be responsible for. The highest tax brackets are often the ones that shift most frequently, says Beverly Bird at The Balance, which means households earning more than $470,000 should keep an eye on which bracket they may be bumped into.
  • Health Care: Since the Affordable Care Act is still in place this calendar year, taxpayers who don’t have proof of insurance, either from an employer or from the Health Care Marketplace, will receive a tax penalty. Remember, if you receive subsidies from the government to pay for your plan, you have to turn this information in when you file, as well.
  • Medical Expenses: If you itemize your taxes, you can deduct medical expenses that cost more than 10% of your Adjusted Gross Income.
  • Tuition: If you’re in school, you’re out of luck - you can no longer claim qualifying tuition and fees on your taxes. However, the American Opportunity Tax Credit still stands.

5. Schedule Doctor’s Appointments

Since medical expense deductions depend on the age of the members in your household, it’s worth checking in on how much you’re able to deduct this year - and plan accordingly.

Work ahead to make sure you’ve scheduled all the necessary doctor’s appointments and follow-ups, advises personal finance writer Kay Bell.

“Be sure to count often overlooked write-offs, such as travel to treatments or even to pick up prescriptions at your pharmacy,” Bell writes at Bankrate.com.

Not sure what you might be eligible to claim? Circle back with your accountant, so you can put all your receipts in order.

6. Increase Your Charitable Giving

Feeling generous with extra disposable income? Consider making a tax-deductible gift before finishing out the year.

But, cautions William Perez at The Balance, you’ll have to itemize your taxes in order to claim the donation as a deduction.

“[This] is typically only in your best interest if the total of all your itemized deductions exceeds the amount of the standard deduction you would receive for your filing status,” explains Perez.

Not sure if this applies to you? Check out this handy guide from TurboTax to learn more about whether or not you should itemize your deductions this year.

7. Move Money to Retirement Accounts

While most retirement accounts have yearly contribution caps, few people ever meet them. If you have more money than you planned for at this point in the year, it may be worth moving more funds into your 401(k) or Roth IRA, says Bell at Bankrate.com.

“If your employer offers a 401(k) and you haven’t taken advantage, check on enrollment details,” Bell advises.

“If you are already contributing, increase the amount of your contributions. This money comes out of your paycheck before taxes are calculated, meaning you’ll get a small but immediate tax break on your earnings,” she adds.

If you’re self-employed, it may be worth opening a Simplified Employee Pension plan, which allows you to contribute as much as 25% of your net earnings. You can also opt for a “solo 401(k),” which offers similar benefits.

Thankfully, these retirement accounts are similar to those offered by employers, which means self-employed workers also have the opportunity to add income to their retirement accounts before filing tax. You’re saving for the future and getting a nice tax break all in one fell swoop.

For more tips on how to handle your accounts if you’re approaching retirement, check out this helpful advice from Fidelity Investments.

While you’re sitting by the pool this summer, don’t get too comfortable - tax season is much closer than you may think!

Make sure your investments, retirement contributions, and expenses are all in order, and you’ve taken advantage of every possible deduction and credit. You’ll be sitting pretty when April rolls around - and your accountant will thank you for it!


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