July marks the halfway point of the year, making it a natural time to review your financial picture. While many tax related decisions have year-end deadlines, beginning the conversation earlier may provide additional time to evaluate available options and determine whether any planning opportunities exist based on your individual circumstances.
Tax planning is one component of an overall financial plan. Beginning the conversation during the middle of the year may provide additional time to review your financial picture, evaluate potential strategies, and consider whether any adjustments are appropriate for your circumstances.
Why Mid-Year May Be a Good Time to Review Your Tax Situation
Many tax-saving strategies, retirement contribution decisions, charitable giving plans, and business planning opportunities are more effective when discussed before the final months of the year. Waiting until November or December can limit the options available and leave less time to implement changes. By July, you may have a better understanding of how the year is unfolding while still having time to make adjustments if appropriate.
A mid-year review may include:
- Current income and withholding
- Investment gains and losses
- Business income and expenses
- Retirement plan contributions
- Major life events that could affect taxes
- Charitable giving plans
For many taxpayers, September 15 marks the third-quarter estimated tax payment deadline, while October 15 is the filing deadline for individuals who requested an extension. As the calendar moves toward year-end, many tax planning strategies, including capital gain and loss planning, Roth conversions, Qualified Charitable Distributions (QCDs), and Required Minimum Distributions (RMDs), typically need to be evaluated and, where appropriate, completed before December 31.1
Starting these conversations before year-end can provide more flexibility than waiting until the final weeks of the year, when planning opportunities may become more limited.
Additional Time May Provide More Flexibility
Having additional time before year-end can make it easier to evaluate potential planning opportunities without feeling rushed. Rather than trying to address everything during the busy final weeks of the year, a mid-year review provides an opportunity to consider your options, gather any necessary information, and coordinate decisions with your financial and tax professionals.
As the year progresses, it may be worthwhile to revisit whether you’re on pace to meet your retirement contribution goals, whether changes in income could affect your tax picture, or whether investment activity has created planning considerations. It can also be an appropriate time to review charitable giving plans, discuss the financial impact of recent family or business changes, and determine whether your tax withholding or estimated tax payments remain appropriate.
Not every review leads to changes, and every situation is unique. However, beginning the conversation earlier can provide more time to evaluate available strategies and implement any decisions that align with your overall financial goals.
Tax Planning Is Part of a Broader Financial Strategy
Tax considerations often interact with other areas of financial planning, including retirement planning, investment management, estate planning, and charitable giving.
Reviewing these areas together may provide additional context when evaluating financial decisions. Depending on your circumstances, certain strategies may be more appropriate than others.
Life Changes May Affect Your Tax Situation
Significant life events often bring new financial planning considerations, including potential tax implications. Reviewing your financial picture after a major life change can help ensure your planning strategies continue to align with your goals and current circumstances.
Changing jobs may affect your income, tax withholding, employee benefits, or retirement plan contributions. Starting or selling a business can introduce new tax considerations and planning opportunities. Purchasing or selling a home, receiving stock compensation or a bonus, getting married or divorced, welcoming a child or grandchild, transitioning into retirement, or receiving an inheritance can each influence different aspects of your financial plan.
A review following one of these events can help identify areas that may warrant additional attention, including tax planning, retirement savings, cash flow, insurance needs, or estate planning. Taking time to evaluate these changes before year-end can provide an opportunity to coordinate your financial decisions and discuss any planning considerations with your financial and tax professionals.
The Value of a Mid-Year Review
A mid-year tax review may or may not result in changes to your financial strategy.
In some cases, the review may simply confirm that your current approach continues to align with your objectives. In other situations, it may identify opportunities that can be evaluated over the remainder of the year.
The purpose of the review is to better understand your current financial picture and determine whether additional planning conversations may be appropriate.
Because every individual’s financial situation is different, any tax planning decisions should be considered in light of your specific goals, circumstances, and, when appropriate, in consultation with your financial, tax, and legal professionals.
Sources
- https://www.irs.gov/businesses/small-businesses-self-employed/tax-calendar
Investment Advisory Services offered through Trek Financial LLC., an (SEC) Registered Investment Advisor.
Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 26-125
