It’s tempting to push tax planning to the bottom of your to-do list, especially in the summer. But according to Fidelity, midyear is one of the best times to make small tax tweaks that can save you money when April rolls around.
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So if you’ve been coasting since filing your 2024 return, now’s the time to check in and get proactive. Here are six tax moves to make before the year slips away.
Update Your W-4 Withholdings
Most people fill out a W-4 when they start a job and never look at it again. But a lot can change after getting that new job, including having a baby, getting a side hustle, or buying a home. All of these can affect how much tax you should (or shouldn’t) have withheld from your paycheck.
If you owed a big chunk or got a huge refund last year, that’s another sign your W-4 might need adjusting. Here’s how to know if it’s time for a refresh:
- You had a child or added dependents. You might qualify for the Child Tax Credit (up to $2,000 per child), or the nonrefundable $500 Credit for Other Dependents.
- You picked up extra income. A second job or side hustle usually means no tax is withheld unless you do it yourself. You might want to increase withholding at your main job to make up the difference.
- You plan to itemize this year. If you’re claiming deductions beyond the standard, you can reflect that on your W-4 to reduce how much is taken out now.
You can use the IRS’s Tax Withholding Estimator to run the numbers. Then just submit a new W-4 to your human resources (HR) department.
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Harvest Tax Losses
If you have some losing investments in your portfolio, you might be able to use those losses to offset gains and shrink your tax bill.
This is known as tax-loss harvesting, which is when you sell underperforming investments to lock in the loss. You can then use that loss to offset gains from other investments or deduct up to $3,000 of ordinary income.
Just watch out for the wash-sale rule: If you repurchase a “substantially identical” investment within 30 days before or after selling it, the IRS won’t let you claim the loss.
Get Organized if You Plan to Itemize
The standard deduction for 2024 is $15,000 for singles and $30,000 for married couples. But if you had big expenses this year, you might want to itemize instead.
If that’s the case, start tracking and organizing receipts now. Fidelity also recommends bunching multiple years’ worth of charitable donations into one year so you can itemize this year and take the standard deduction next.
Max Out Pre-Tax Accounts
If you haven’t been contributing to your pre-tax accounts, summer is a good time to start catching up.
Here’s what you can still contribute for 2025:
- 401(k) and 403(b) plans: Up to $23,500 (plus $7,500 catch-up if 50 and over)
- Traditional IRA: Up to $7,000 (plus $1,000 catch-up if 50 and over)
- Health savings account (HSA): Up to $4,300 for individuals or $8,550 for families (plus $1,000 catch-up if 55 and over)
Prep for Required Minimum Distributions (RMDs)
If you turned 73 this year, you’ll have to start taking money out of your traditional retirement accounts, whether you want to or not. These RMDs are taxable, and skipping them can lead to penalties (25%, reduced to 10% if corrected in time). So if you’ll be approaching 73, make a plan now to avoid last-minute scrambling in December.
Think About a Roth Conversion
A Roth conversion allows you to convert pre-tax traditional IRA funds to a Roth IRA. You’ll pay taxes upfront but enjoy tax-free withdrawals and no RMDs later. It’s also a smart way to pass tax-free assets on to your heirs.
If your income is too high to contribute to a Roth IRA directly, you might consider a backdoor Roth IRA strategy.
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This article originally appeared on GOBankingRates.com: 6 Tax Moves To Make During the Summer, According to Fidelity
