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Are You Overpaying in Taxes? Here’s How to Check Mid-Year

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Tax season might seem like a once-a-year affair, but smart taxpayers know the best time to optimize your tax strategy is mid-year—not April. A proactive review in July or August gives you time to uncover hidden opportunities, fix overpayments, and pivot strategies before the year ends. Many Americans unintentionally give the IRS a no-interest loan through excess withholding or missed deductions, only to discover it too late.

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So how can you tell if you're overpaying? And what should you do about it?

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Let’s explore the seven-step mid-year tax checkup, including updated 2025 figures, deduction insights, and smart planning strategies to keep more of what you earn.

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Why Mid-Year Matters: Timing Is Everything

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A mid-year tax review allows you to:

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• Adjust withholdings or estimated payments

• Maximize retirement contributions

• Capture new deductions or credits

• Avoid penalties from underpayment

• Plan for life changes (marriage, kids, job change, etc.)

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📅 By July, you have six months of financial activity to analyze and six more months to improve your outcomes. That’s powerful leverage—if used wisely.

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Step 1: Recalculate Your 2025 Taxable Income

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Start with a projection: What will your adjusted gross income (AGI) be by year-end? This includes:

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• Wages and salaries (check year-to-date pay stubs)

• Side hustle income or 1099 gig work

• Investment income (dividends, interest, capital gains)

• Retirement distributions

• Business or rental income

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Then subtract your above-the-line deductions, such as:

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• Retirement contributions (IRA, HSA, solo 401(k))

• Student loan interest (up to $2,500, if eligible)

• Self-employed health insurance

• Educator expenses (up to $300 in 2025)

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📌 Use the IRS Tax Withholding Estimator to input your current income and deductions. This tool provides a personalized look at whether you're underpaying or overpaying.

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Step 2: Review Your Withholdings

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If you’re an employee, your W-4 tells your employer how much tax to withhold from each paycheck. If you haven’t updated it in a while—especially after major life changes—you're likely overpaying or underpaying.

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Common signs of over-withholding:

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• You received a large refund last year (more than $1,000)

• You’re not claiming available tax credits or dependents

• You're contributing to pre-tax accounts but didn’t adjust withholding

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📌 Use the IRS estimator or work with your accountant to re-file your Form W-4 mid-year and balance your cash flow vs. liability. Need help? Vincere Tax can guide you through your W-4 strategy.

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Step 3: Are You Making Estimated Payments? Adjust If Needed

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If you’re self-employed, retired, or have significant side income, you may be making quarterly estimated tax payments. The due dates for 2025 are:

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• Q1: April 15

• Q2: June 16

• Q3: September 15

• Q4: January 15, 2026

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If your income has increased (or dropped), recalculate what you’ll owe by year-end. To avoid underpayment penalties, ensure you’re paying the lesser of:

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• 90% of your total 2025 tax, or

• 100% of your 2024 tax (110% if AGI > $150,000)

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📌 Use Form 1040-ES to update or adjust your remaining payments.

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Step 4: Maximize 2025 Retirement Contributions

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One of the most effective ways to reduce taxable income and grow your wealth is to boost pre-tax retirement contributions.

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Here are the 2025 contribution limits:

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Step 5: Mid-Year Deduction & Credit Opportunities

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✅ Itemized Deductions vs. Standard Deduction

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In 2025, the standard deduction is:

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• $15,750 for Single

• $31,500 for Married Filing Jointly

• $23,625 for Head of Household

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If your itemized deductions (mortgage interest, charitable donations, medical expenses over 7.5% of AGI, property taxes) exceed that amount, itemizing could reduce your taxable income further.

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📌 Action Step: Track deductible expenses now. Mid-year is a great time to make charitable donations or pay property taxes early to optimize itemizing.

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✅ Tax Credits to Watch For

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Credits directly reduce your tax liability—dollar-for-dollar.

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• Child Tax Credit: Up to $2,200 per child (phases out at higher incomes)

• Child and Dependent Care Credit: Up to $2,200 based on expenses

• Saver’s Credit: Up to $1,000 for retirement contributions (income limits apply)

• EV Tax Credit: Up to $7,500 for eligible electric vehicle purchases

• Clean Energy Credits: Home improvements like solar, battery storage, or heat pumps may qualify for a 30% tax credit

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Step 6: Plan for Life Changes

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Have you experienced (or anticipate) any of the following?

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• Marriage or divorce

• New child or dependent

• Job or income changes

• Moving to a different state

• Buying a home

• Selling stock or real estate

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All of these can impact your tax picture. A mid-year check gives you time to adjust strategies like filing status, dependent claims, or income timing.

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Example: If you’re getting married in 2025, check if filing jointly or separately makes more sense and update your W-4 accordingly.

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Step 7: Harvest Gains or Losses Before Year-End

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Capital gains taxes can sneak up on you if you’re not tracking them. A mid-year portfolio review with your advisor can help you:

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• Sell underperforming assets to offset capital gains (tax-loss harvesting)

• Avoid higher long-term capital gains brackets (15% vs. 20%)

• Consider qualified dividends and holding periods

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In 2025, long-term capital gains are taxed at:

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• 0% for income under $47,025 (single) or $94,050 (MFJ)

• 15% for most

• 20% for income over $518,900 (single) or $583,750 (MFJ)

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📌 Carefully timing sales can save thousands—especially if you’re near a threshold.

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What If You Are Overpaying?

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🎯 Adjust your W-4

Submit a new W-4 to reduce withholding and increase your take-home pay for the rest of 2025.

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🎯 Recalculate estimated taxes

If you’re self-employed or own a business, lower your next quarterly payment accordingly using updated income projections.

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🎯 Redirect savings

Use the extra cash for tax-smart moves: max out your Roth IRA, contribute to an HSA, or increase 401(k) deferrals.

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🎯 Consult a tax pro

Tax law is complex, and every life situation is unique. Vincere Tax can help identify tailored adjustments and strategies to keep more money in your pocket.

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The Power of Proactive Planning

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Taxes are one of your biggest lifetime expenses. Waiting until next spring limits your options. But when you take charge mid-year, you unlock:

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• Increased refund or reduced liability

• Greater cash flow control

• Fewer surprises come April

• Strategic flexibility for investments, donations, and savings

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💡 Mid-year is the perfect time to ask: “Am I keeping enough of what I earn?” With smart planning and the right guidance, you can confidently answer: Yes.

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Ready to Take Control?

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A mid-year tax checkup can save you thousands in overpayments, penalties, or missed opportunities. Vincere Tax makes it easy to analyze your situation and execute smart strategies before it’s too late.

Don’t wait until the next tax season. Take control now—your future self (and your bank account) will thank you.

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Frequently Asked Questions (FAQs)

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1. How do I know if I’m overpaying in taxes?

Check last year’s tax return. If you received a large refund or made large estimated payments, you may be overpaying. Use the IRS Withholding Estimator to run a mid-year check.

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2. Can I change my W-4 anytime during the year?

Yes. You can update your W-4 with your employer at any time. It’s wise to do so after life events like marriage, a new child, or income changes.

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3. What if I underpay my taxes by year-end?

You may face penalties if you don’t pay enough tax throughout the year. To avoid penalties, aim to pay at least 90% of your 2025 tax or 100% of your 2024 tax (110% for high earners).

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4. Do tax credits reduce my refund or my total tax owed?

Tax credits reduce your total tax owed. Some credits are refundable (you get a refund even if you owe no tax), while others are nonrefundable.

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5. When is the next estimated tax payment due?

The next quarterly payment is due September 15, 2025. Use Form 1040-ES to calculate what you owe.

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I hope this information was helpful! If you have any questions, feel free to reach out to us here. I’d be happy to chat with you. 

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Vincere Tax can help you with the tax implications of business taxes, stocks, bonds, ETFs, cryptocurrency, rental property income, and other investments. 

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Being audited is comparable to being struck by lightning. You don't want to practice pole vaulting in a thunderstorm just because it's unlikely. Making sure your books are accurate and your taxes are filed on time is one of the best ways to keep your head down during tax season. Check out Vincere's take on tax season!

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This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.