The year is halfway over. Your tax bill isn’t written yet.
Most people think about taxes once a year — in April, when the damage is already done. But the decisions you make between now and December have a bigger impact on what you owe than almost anything you’ll do in tax season itself. That’s why we build midyear check-ins into our planning process at Sunpointe. Not to add complexity — but to eliminate surprises.
Withholding check: Are you on track?
This is the most common and often overlooked question we receive from the families we work with that are still working. Halfway through the year is an easy point to see where you are tracking in terms of your federal and state withholdings relative to year-end expectations. Updating your W-4 form with your employer allows you to adjust your withholding amount based on your income expectations, but they are rarely updated. Getting married or divorced, having a child, or having a child go out on their own can impact your withholding requirements. While these family level changes can impact withholding, a spouse who receives a large bonus or a big promotion can create a withholding gap. If one spouse receives a bonus or promotion, the other spouse’s employer has no way of knowing unless that spouse informs their employer of a desired change to their withholding. Having a mid-year check-in helps avoid tax surprises.
Where you hold assets matters: Asset location
Sunpointe Investments is focused on getting our hands dirty to helping you grow your assets into something meaningful. During the growth process, it’s important to limit what works against you, like taxes on your investments. Think of your account types, taxable, tax deferred, and tax-free as being similar to plants located around the outside of your house. Some plants thrive in full sun; others need shade to survive. Put a shade plant in direct sunlight and it burns, not because anything is wrong with the plant, but because the environment isn’t right for it. Investments work the same way. The right account can thrive in the right environment. Holding interest-generating bonds or high turnover funds in a taxable account can create tax drag, even when your overall investment strategy is sound. Moving a tax heavy allocation to a tax-deferred or tax-free account can improve long-term growth without changing your risk profile.
Equity compensation: Wrong rate or wrong time
Year-end bonuses and equity compensation can feel like big wins, and they are, but they can result in a larger impact on taxes than most people anticipate.
Bonuses are typically withheld at a flat federal rate that may understate your true liability if you’re in a higher bracket. Restricted stock units (RSUs) are taxed as ordinary income when they vest, not when you sell, and companies frequently have a fixed withholding rate for RSUs as well. The result can be the same in either circumstance: a gap between what was withheld and what you owe that is discovered in April. The solution, periodic review of your financial plan, including a mid-year check-up, to make sure you are independently withholding the correct amount of taxes.
Many families we work with receive bonuses that are withheld at fixed rates (22% for bonuses under $1m and 37% for bonuses over $1m) which means there can be a gap between what is withheld, and what is owed. To avoid a tax surprise in April, we manually calculate the additional withholding needed and identify the the gap between what is being withheld and what will likely be owed, to estimate the amount to be set aside or made as a quarterly payment (depending on CPA recommendations).
RMDs: The retirement reality you can’t ignore
Starting at age 73 or 75 (depending on date of birth), retirees must begin withdrawing from pre-tax retirement accounts, whether they need the money or not. These Required Minimum Distributions (RMDs) are taxed as ordinary income and can have a ripple effect most people don’t anticipate. They can increase the taxable portion of your Social Security benefits, trigger higher Medicare premiums through IRMAA surcharges, and push you into a higher bracket at exactly the wrong time. The longer retirement accounts grow, the larger those distributions can become. What feels manageable at 73 can become a significant tax event by 78 or 80. The good news is there are planning strategies that can reduce the impact of RMDs such as Roth conversions in lower-income years, Qualified Charitable Distributions (QCDs) for those who are charitably inclined, and thoughtful timing of Social Security. But these strategies have windows to make decisions, and the sooner you begin to prepare for this, the better.
The bottom line: Take advantage of mid-year tax planning
Tax surprises are rarely random. They’re usually the result of decisions, or inaction, that occur throughout the year. A midyear check-in won’t guarantee there will be no surprises in April, but it dramatically improves the odds.
If any of these four areas resonate with your situation, we’d love to connect. That’s exactly what we’re here for.
At Sunpointe, our goal is to give every family clarity, comfort, and confidence, not just at tax time, but all year long.
