It is July: What You Should Be Doing Mid-Year to Boost Your Tax Return

• Author: Jeffrey Simmons
• Posted: 2024-08-19

You may not be thinking about your taxes during the middle of the summer. But personal investing experts know that this is a great time of the year to take inventory of your financial situation and make the necessary adjustments now to cut what you owe in taxes come next April. Here are a few tax moves that you should consider now if you want to reduce what you owe to the government next season.

Review Your Withholdings

The middle of the year is an ideal time to review your withholdings so that you avoid paying a penalty a few months down the road. This is particularly important if you are a freelance worker and need to withhold your own money for taxes. This is also critical if you have experienced a major life change this year. This would include a marriage, a divorce, or the birth of a child.

There are a number of resources that can help you to estimate where your tax refund or payment will fall. You can go straight to the IRS Tax Withholding Estimator to determine if you are on track with your goals.

Invest in Your Nest Egg

While not everyone has room in their budget to invest more money into their nest egg, this move is a surefire way to reduce your tax burden. Boosting your pre-tax retirement savings lowers your adjusted gross income in the process, bringing down the amount of money that you owe for taxes. Keep in mind that if you are under the age of 50, you are allowed to squirrel away up to $20,500 in your 401k each year. This number goes up an additional $6,500 if you are age 50 or older. If you have not yet reached these limits, this is a good time to try to find that extra money to make it happen.

Boost Your Charitable Giving

Another great way to improve the state of your tax return next spring is to be intentional about boosting your charitable giving for the rest of the year. You can cushion the blow to your budget if you set up a monthly deposit into the charity of your choice for the remainder of the year. Spreading the giving out over the next few months will make it easier to absorb into your budget. This strategy will also make you feel good about what you are doing with your money, boosting your overall happiness at the same time.

Start a Side Gig

Discover what many other savvy professionals have learned about side gigs and the numerous tax advantages. Self-employed workers are eligible for a variety of deductions even if it is not full-time work. Some of the most common deductions include advertising, membership dues, business-related travel, office supplies, vehicle mileage, and website fees. If you feel as if the deductions are becoming too complicated, you would be wise to consult the expertise of an accountant. You also want to take care to not break any rules so that you do not get dinged later down the road. As a bonus, this approach will also earn you some extra spending money along with the tax deductions.

Open a Health Savings Account

Opening and contributing to a health savings account (HSA) is also a great way to lower your taxable income. This is an especially good strategy if you have a high-deductible medical plan or if you know that you have an upcoming procedure that will cost you a significant amount of money out of pocket. Keep in mind that the rules for opening an HSA vary by organization. Any contributions to an HSA delivers an immediate tax deduction. The money also grows tax-deferred, allowing you to withdraw the funds for qualified medical expenses. You can then roll over any leftover money at the end of the year, making this a relatively low risk way to lower your tax bill.

There is still time to make the changes that will improve your tax filing for next year. Taking these steps now will help you to achieve your financial goals and ensure that you are not caught off guard when tax season rolls around.