Time for That Mid-Year Finance Check-up

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Time for That Mid-Year Finance Check-up

June 6, 2019

Time for That Mid-Year Finance Check-up

Believe it or not, summer is almost here and 2019 half over. Taking time for a mid-year tax and overall financial “check-up” is important. Here are some questions to consider:

1. Have you updated your W-4? You don’t want to underpay or overpay Uncle Sam. To determine the proper number of withholding allowances, go to www.irs.gov and type the words “withholding allowance” in the search box. It will provide you with a simple worksheet. Answer a few questions and you’ll have the correct number of allowances to withhold. You are allowed to adjust your W-4 at any time during the year, and should do so whenever your situation changes for events such as a marriage, divorce, death, birth, etc.

2. Are you maximizing the potential interest on your savings? Perhaps your savings account doesn’t exist at all;now is a great time to start! If you can save just $1.00 per day for the rest of the year, you’d have over $200 by the end of year. While it may not sound like much, it may be more than you have now, and even more importantly, it will get you into the habit of saving. Also, many banks and credit unions now offer interest on accounts that is remarkably high compared to standard rates for such accounts. Just make sure that the financial institution where you deposit your money is FDIC or NCUA insured.

3. Are you financially organized and are you tracking your spending? Even if you feel as though you have control of your spending, you won’t know for sure until you track it for at least 30 days. Write down every cent you spend, and then put your spending into categories. At this point you can make conscious decisions regarding how you want to spend moving forward. If you were set up to make estimated tax payments; make sure those are getting in on time.

Time for That Mid-Year Finance Check-up

4. Do you have a child starting college? There are several possible tax breaks to consider; if you qualify, the American Opportunity Tax Credit (AOTC) may be the best. The AOTC can be worth up to $2,500 per undergraduate every year for four years. Different college-related credits and deductions have different rules, so let us help you consider which one is best for you. Regardless of which tax break you use, remember: you can’t use the same qualified college expenses to calculate both the tax-free withdrawal from a 529 college savings plan and a federal tax break – you can’t pay the entire college bill with an untaxed 529 plan withdrawal and be eligible for a college tax credit or deduction.

5. Is your income approaching the net investment income tax (NIIT) threshold? The NIIT, often called the Medicare surtax, is a 3.8% levy on the lesser of net investment income or the excess of modified adjusted gross income above $200,000 for individuals, $250,000 for couples filing jointly, and $125,000 for spouses filing separately. In addition, taxpayers with earned income above these thresholds will owe another 0.9% in Medicare tax too. If you think you’ll surpass these levels, consider strategies to defer earned income or shift investments to tax-advantaged retirement accounts.

6. Are you getting ready to retire or reaching age 70½? If you’re planning to retire this year or are already retired, and plan to begin withdrawing money from your savings, the accounts you tap first and how much you withdraw can have a major impact on your taxes as well as how long your savings will last. A mid-year tax check-up is a good time to start thinking about a tax-smart retirement income plan.

Call us with questions you may have!