Tax season is approaching…! In about nine months! So that means it’s time for your mid-year tax check up. If you find yourself overwhelmed during tax season because you haven’t thought about your taxes all year, a mid-year tax check is just what you need. Here are some things to check for now to reduce stress during “the season”:
1. Did your income change?
If you recently received a promotion or a pay raise, make sure to reassess your income. With a higher income, your tax withholding amount will increase. However, if you have a side gig, the pay increase from your main job along with the extra side hustle revenue might qualify you for a higher tax bracket. This is a good time of the year to reassess your current income and check for any taxable changes.
2. How much have you given to charity? Do you have any automatic charity withdrawals set up?
If you’ve given to charity throughout the year, use the summer to organize your receipts. (We all know we can deduct charitable giving from our taxes, right?). If you’ve set up automatic charity withdrawals for some foundations, make sure you tally those donations as well. Sometimes automation makes us forgetful! If you have extra money to give to your favorite charity, summer months are a good time to make extra donations. If you’ve prepped for it, itemizing each charity during tax season is a piece of cake.
3. Did your marital status change?
If you’re getting married, you need to start thinking about whether you are going to file taxes separately or jointly. Your decision might call for a change in your W-4. Marital status changes also apply if you are going through a divorce.
4. Do you have an additional dependent or is your child going to college?
Dependents are important to account for…for multiple reasons obviously, but for taxes too! If you have a newborn, checking your W-4 to make sure that your tax withholding amount now includes dependents is important to do–more tax breaks for you. If you have a child in college, now is also a good time to check which tax exemptions might apply to your situation. If you’re child is no longer a dependent, check your W-4, maybe now is a good time to increase your withholding amount.
5. Health check?
Did you have an unexpected medical expense this year? Go back and review your medical bills to ensure an accurate log. Medical expenses that are not reimbursed by your insurance are sometimes tax deductible. For example, dental and visions costs can be deducted. A mid-year tax check will insure you catch these!
6. Any unused balances?
If you are enrolled in any sponsored program that gives you a balance, make sure you’ve taken advantage and used up the balance! Examples of these programs are subsidized school lunch programs or scholarships you’ve been given that have to be used in a fiscal year.
7. Not exactly taxes, but still an important part of the mid-year tax check—your 401K contribution!
If your employer provides you a 401K option, reviewing your contribution mid-year is a perfect way to make sure you are contributing as much as you can –and ideally getting the benefits to boot! How much are you contributing each month? Can you afford a little bit more? Are you getting your employer match? How’s your 401k portfolio doing? Growing?
A lot of employers match the amount you contribute to a 401K up to a certain amount of your salary (say 3%). So if you put 3% into your 401K the company will put another 3% in and voila, you’ve just doubled your money with a 6% contribution to your retirement plan. This is essential “extra” income that your employer is willing to give you and you should definitely take advantage of to grow your wealth even more!
Image credit: Mirjana Jesic