Summer Planning: Vacations, Beach Time…and Taxes?

June, the first official month of summer. For many people, summer is a time for vacations, fishing, and spending time at the beach. Consider adding to that list everyone’s least favorite topic – income tax planning. I know you are thinking, “I just filed my tax return, why do I need to start thinking about my taxes now?” But, a few simple moves now could save you financial and mental stress when tax time rolls back around.

 Start with the Basics

Are you one of those that celebrates a tax refund every year in April? Or were you hit with an unexpected tax bill that stressed you out? Either scenario suggests it’s time to review your paycheck withholdings. If you received a refund of over $1,000, you essentially gave the government an interest-free loan all year. This is your money. Too little withheld and you might face penalties on top of what you owe.

Consider adjusting your W-4 with your HR department to either increase or decrease your federal withholding.

 The Self-Employed Advantage

If you’re self-employed or have significant investment income, quarterly estimated payments can help you avoid year-end surprises and penalties. Review your income projections now and adjust payments accordingly.

Work with a CERTIFIED FINANCIAL PLANNER® professional to determine eligibility for retirement plans exclusively for the self-employed. Planning options for your retirement may enable you to save on taxes for the current year.

Don’t Leave Money on the Table

Summer is perfect for maximizing workplace benefits.

If your employer matches 401(k) contributions, make sure you are contributing the maximum allowable to get the full match from your employer.

Are you enrolled in a high-deductible health plan? If so, you can contribute to a Health Savings Account (HSA) for triple tax benefits: current tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses.

Leftover money in your flexible spending account? Do not forget to use it before you lose it and consider adjusting next year’s contribution based on this year’s actual spending.

Timing Is Everything

Strategic timing can significantly impact your tax bill. Planning a large charitable donation? Consider bunching multiple years’ worth into 2025 to exceed the standard deduction threshold. Have medical procedures you’ve been postponing? Grouping them into one tax year, with other eligible itemized deductions such as charitable, might push you over the deduction limit.

Don’t Wait Until December

The biggest mistake people make is waiting until the last minute. By December, many tax-saving opportunities have expired, and you’re left with limited options, not to mention holiday stress.

Tax planning isn’t just for the wealthy—these strategies can work to help save hundreds or thousands of dollars. The key is starting now, while you still have time to make meaningful changes.

 

Published in the Victoria Advocate

Chris Laughhunn, CPA, CFP® is a Tax & Accounting Principal for Keller & Associates CPAs, PLLC and an Associate Advisor for Keller Wealth Advisors.