Mid-Year Tax Check-In: How To Optimize Your Tax Strategy

If you’re like many people, you associate April and perhaps the months immediately before it with tax season. But tax strategy can be best optimized by paying steady attention to it, not just at a certain period of the year. That’s why a mid-year tax check-in with a financial advisor can help you create the maximum tax efficiency and planning for the upcoming year(s).

High-income and high-net-worth individuals need to be particularly focused on tax efficiency, for several reasons. First, your income likely places you in a higher tax bracket. The higher your tax bracket, the more taxes erode your earnings. Second, you likely have substantial asset portfolios. These are, of course, subject to tax of several different kinds. Dividends and interest are taxed, and sales of securities are subject to capital gains taxes. 

These taxes can reduce the earnings on your portfolios. A prudent tax strategy, on the other hand, can ensure that you pay as little tax as possible on your income and on your assets. Without a prudent tax strategy, you may be paying more in tax than you have to thus reducing potential wealth creation. 

To begin your mid-year tax check-in, schedule a meeting with your San Antonio financial advisor to discuss your tax strategy as part of your overall financial plan. 

Your tax planning appointment will include the following:

1. A review of your overall financial goals

All financial planning is determined by your goals, and tax planning is no exception. It’s a very prudent idea to review your goals in mid-year and at the end of the year with your San Antonio financial advisor. Are your goals still the same or do you need to adjust or change them? Have life events such as a marriage, birth, a move, or a change in jobs changed or necessitated an adjustment of your goals?

After you think about these questions, review whether you’re making steady progress toward your goals. Are any of them close to full achievement? What might you replace them with, if so? Do you want faster (or slower) progress toward other goals?


2. A review of your overall financial situation

Your taxes and applicable tax efficiency are very much determined by your financial situation. Take a minute to review your overall financial situation with a Texas financial advisor as well. Look at your income, including salary, revenue from a business if you have a business, and returns on assets. Is your income fairly steady with the year before or have you seen significant increases or decreases? What are your income projections for the rest of the year?

Look at your expenses and obligations as well. Are they steady year over year, or have you seen significant increases or decreases? What about your projections for the rest of the year?

3. Goal-related tax planning and strategy

Once you review, it’s time to set up a plan to optimize your tax strategy. Reviewing your goals with your financial and tax advisors can give them an insight into how best to craft a strategy.

Any life event may give rise to tax-related planning. The birth of a baby, for example, might necessitate educational tax-advantaged savings or the creation of savings and assets, especially for the child’s future. A marriage might lead to the purchase of a new home, which can trigger tax events such as a sale of the previous home. A new job might place you into a different tax bracket or offer new opportunities for tax-advantaged savings for retirement, if, for example, the new job offers a matching 401(k) and your previous one did not.

A review of your progress toward your goals may also lead to new tax strategies, including the following. 

  • Charitable giving

Charitable giving is tax-deductible as well as a method of aligning your goals with your Judeo-Christian values. Charitable contributions help you manage the tax on your income by controlling the level of reported taxable income. If you are in the 37 percent tax bracket, for example, contributing $10,000 to the charity of your choice has the potential to decrease your taxes by $3,700. You can also donate appreciated securities and other assets, such as real estate, and can lessen or completely avoid capital gains taxes on them. 

  • Tax-advantaged savings 

Tax-advantaged savings for retirement such as 401(k)s and Individual Retirement Accounts (IRAs) reduce your taxable income and allow your investments to grow tax-free until they are withdrawn at retirement. 

If you are eligible for a Health Savings Account (HSA), these also reduce your taxable income. The funds can be invested, and any appreciation grows tax-free until withdrawal. The funds can be used for qualified healthcare expenditures. You can also roll unused funds over year after year. 

  • Tax loss harvesting

Tax loss harvesting refers to the process of using losses in a securities portfolio to offset gains. If a stock in your portfolio is not performing to expectations, for example, you can sell it at a loss to free up the money for another investment. The realized loss can be used to reduce your tax liability for a realized gain in another security. 

  • Investing for the long-term

Investing for the long term (over 1 year) can decrease your taxes because investments held for the long term are subject to lower capital gains taxes than short-term holdings. Long-term appreciation and compound interest accruing over the long term is the most efficacious avenue for wealth creation.

  • Investing in funds that minimize taxes

Many mutual funds and exchange-traded funds (ETFs) are specifically tailored to minimize taxes, including passively managed index funds, ETFs, and tax-managed funds with lower turnover rates.

Contact PAX Financial Group in San Antonio, TX

High-net-worth individuals can benefit from customized tax strategies to ensure that their wealth creation continues to be robust. At PAX Financial Group, we are fiduciaries who share your Judeo-Christian values. We offer comprehensive financial planning that will help you realize your most cherished goals.



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