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You can probably relate to the gag line: “Work fascinates me; I could sit and think about it for hours.” Many of us could also substitute “planning” for the first word. Be honest: How many times have you envisioned a project or task, even thought about the steps involved… but never actually did anything about it?
And let’s face another unpleasant fact: nobody likes to plan or even think about taxes. But as we also know, tax season is like being “it” in hide-and-seek: it comes every year, ready or not.
What tax planning should I do in the middle of the year?
So, now that we’ve popped the firecrackers and finished off the leftover watermelon and homemade ice cream, it’s a good time to get started planning (and doing something about) our taxes, while we’ve still got several months before the books close on another year.
1. Estimated tax payments. If you are a W-2 employee, take another look at your withholding. Especially if your number of dependents has changed (in either direction), if you’ve added income from a side hustle, or if your investment income has trended up (a good possibility in decent market years), bumping up the tax withheld from your paycheck can help you avoid writing a much larger check, all at once, next April. Retirees may want to look at how much is being withheld from Social Security or pension payments and make appropriate adjustments. If you wound up owing more than expected last year, adding a little more to your withholding now can help address the problem.
2. Tax-loss harvesting. Though investment losses are never fun, they can be turned to good advantage for reducing the capital gains tax owed on other parts of the portfolio. Now is the time to speak with your financial advisor about “paper” losses that could be realized to offset other gains. It will be important to maintain your target asset allocation during this process, and also to carefully observe the “wash sale” rule as you re-deploy the proceeds from any asset sales.
3. Reconsider itemizing. With the new, higher state/local tax (SALT) deduction made possible by the One Big Beautiful Bill Act (OBBBA) of 2025, married taxpayers with $500,000 or less in modified adjusted gross income (MAGI) may be able to deduct up to $40,000 in applicable state and local taxes. In some cases, the higher deduction could make it advantageous to itemize deductions, rather than simply taking the standard couple’s deduction of $32,200 for the 2026 tax year.
4. Bundle charitable gifts. And speaking of itemizing, this is the time to consider bundling multiple years’ worth of charitable donations into a single year, which is another way to potentially increase itemized deductions above the standard amount. Using a donor-advised fund (DAF), you can donate various types of assets now and the fund can allocate the proceeds over several years to qualified charities of your choice: a win for your valued cause and a potential tax savings for you.
5. Anticipate executive compensation. If you are receiving restricted stock units (RSUs), exercising stock options, or being vested with some other form of executive compensation, you may need to free up cash to cover the associated taxes. Or, if you’re retiring soon, you may need to begin unwinding a concentrated stock position (which typically carries a capital gains price tag). Either way, now is the time to plan ahead for covering these expenses.
6. Consider a Roth conversion. Mid-year is also the ideal time to review the suitability of a Roth conversion: rolling over assets in a traditional (pre-tax) retirement account to a Roth (after-tax) IRA. You should consult with your financial and tax advisors, since you’ll need to pay the tax on the converted amount (ideally, in a year when you might be in a lower marginal bracket). But once in the Roth account, the funds will continue to grow tax-free and, even better, qualified retirement withdrawals are not considered taxable income (unlike required minimum distributions—RMDs—from traditional accounts). And by the way, a Roth conversion can also offer tax advantages to your heirs. Because a Roth account stipulates a beneficiary, assets in the account can be passed to a desired recipient without the necessity of probate, and as long as the account was open for at least five years prior to your passing, the income they draw from the account is not considered taxable.
Tax Bracket Management and Tax Planning at Midyear
All of the above ideas are tools that can be used to manage your tax bracket. In fact, that is the main difference between simply doing tax preparation and actually doing tax planning: tax preparation just involves taking whatever information exists and plugging it into your return. On the other hand, tax planning involves actively taking steps to control how much income you receive in a given year, by
- accelerating or delaying its receipt (such as pushing bonuses or sale proceeds into the next calendar year);
- making maximum use of income-reducing strategies like deductions;
- contributing to qualified accounts;
- tax-loss harvesting;
- philanthropic strategies.
Employing these techniques can help you avoid making unnecessarily large tax payments, maximizing your after-tax income (i.e., the money you can actually spend and enjoy).
Bracket management and tax planning are also important in the retirement years, as you pull income from a mix of taxable, tax-deferred, and tax-free sources. Adjusting the mix of income received from each source allows for efficient bracket management and better tax planning.
But for any of this to work, planning ahead is vital. That’s why midyear is the right time to get started looking at your tax picture for the future filing season. At Aspen Wealth Management, we want our clients to be prepared with all the information and guidance they need to take as much stress as possible out of preparing and filing their tax returns. If you’d like to explore your tax planning strategies further, we’re here to help.