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Global Tax Insights

3 Midyear Tax Planning Tips

July 01, 2016

Looking to be proactive with taxes this year? There are many things you should do at midyear — like checking if you’re in the same tax bracket you once were.

Many people wait until year end to start taking steps to reduce their tax liability. But you may be able to save (or at least defer) more tax if you start tax planning midyear. You’ll have more time to implement tax-saving strategies, and you potentially can avoid taking actions that could inadvertently boost your tax bill.

1. Check Your Tax Rate

Even though tax rates are the same in 2016 as they were in 2015, you can’t assume you’ll be in the same tax bracket. The income ranges for each bracket are annually adjusted for inflation, but if your income is growing at a higher rate, you could be pushed into a higher bracket. On the other hand, if you had an unusually large influx of income last year — such as significant capital gains or an extra-large bonus — you might end up in a lower bracket in 2016.

Your income affects not only your tax rate, but also your eligibility for a variety of tax breaks. That’s why it’s a good idea to check where you are income-wise midyear and then project your income for the rest of the year. If you can, project your income for 2017 as well.

2. Accelerate or Defer

If it looks like your 2016 income could be near the threshold for the next tax bracket, consider strategies for reducing your taxable income. For example, you could take steps to defer income and accelerate deductible expenses.

If you expect to be in a higher bracket in 2017, consider the opposite approach: Accelerate income into this year and defer deductible expenses to next year — but only to the extent that you won’t push yourself into the higher bracket this year. Remember, deductions are more valuable when you’re subject to a higher tax rate.

3. Take a Look at Your Portfolio

Review your year-to-date investment activity. So far, do you have a net gain or a net loss? If you have a net gain, see if you have an investment you could sell at a loss to offset it. If you have a net loss, do you have an appreciated investment that you’ve been wanting to divest yourself of but haven’t done so because of the tax cost? Now might be a good time to sell that investment.

There is no wrong time to do some loss harvesting. Even if you don’t have any current realized gains, you can always stockpile those losses and carry them forward to some year when you have the gains. And, if you don’t want to be out of the market but still want to harvest losses, consider trading out of mutual funds and into Exchange Traded Funds (ETFs) that give you similar investment allocation exposure but still keep you from falling into the wash-sale rules. Take advantage of temporary dips in the market!

Also keep in mind the 3.8% net investment income tax (NIIT). You could be subject to this tax if your modified adjusted gross income (MAGI) exceeds $200,000 individually ($250,000 for joint filers). If your MAGI could expose you to the NIIT, consider this tax before selling any investments. See our previous blog for ideas on reducing your NIIT liability.

For additional tax planning tips, see our previous blog,

Or contact us. Our tax professionals can help you start your 2016 tax planning now, while there’s still plenty of time to implement the most beneficial strategies.

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