Maximize Retirement Contributions
Contribute the maximum allowed to tax-advantaged retirement accounts like a 401(k), IRA, or Roth IRA to reduce taxable income.
Take Advantage of Employer 401(k) Match
Contribute enough to your employer-sponsored 401(k) to receive the full match. This is essentially free money.
Use a Roth IRA for Tax-Free Growth
A Roth IRA allows your investments to grow tax-free, and withdrawals in retirement are also tax-free, as long as you meet the requirements.
Contribute to a Health Savings Account (HSA)
Contributions to an HSA are tax-deductible, and the funds grow tax-free. You can also withdraw money tax-free for qualified medical expenses.
Tax-Loss Harvesting
Offset capital gains by selling investments at a loss. You can use these losses to reduce your taxable income.
Take Advantage of Tax-Deferred Growth
Invest in tax-deferred accounts like traditional IRAs or annuities, where you only pay taxes when you withdraw the funds.
Invest in Municipal Bonds
Interest from municipal bonds is often exempt from federal income tax, and in some cases, state and local taxes as well.
Utilize Capital Gains Tax Rates
Long-term capital gains (on assets held for more than a year) are taxed at a lower rate than short-term capital gains, which are taxed as ordinary income.
Invest in Real Estate
Real estate investments offer various tax benefits, such as depreciation deductions and the potential for tax-deferred exchanges (like a 1031 exchange).
Claim the Child Tax Credit
If you have children under 17, you may qualify for a tax credit up to $2,000 per child, which can reduce your tax liability directly.
Take Advantage of Tax Credits for Education
The American Opportunity Tax Credit and Lifetime Learning Credit can provide significant savings for education expenses.
Invest in a 529 Plan for Education Savings
Contributions to a 529 college savings plan may be tax-deductible in some states, and the funds grow tax-free when used for qualifying education expenses.
Consider a Donor-Advised Fund (DAF)
If you’re charitably inclined, a DAF allows you to deduct charitable donations upfront, while allowing the funds to grow tax-free.
Claim the Saver’s Credit
Low to moderate-income taxpayers may qualify for a tax credit when they contribute to retirement accounts like IRAs or 401(k)s.
Avoid Early Withdrawals from Retirement Accounts
Withdrawals before age 59½ from retirement accounts may incur penalties. Avoid early withdrawals to keep your tax strategy intact.
Leverage Depreciation on Real Estate
If you invest in rental property, you can deduct depreciation, which helps reduce your taxable income.
Consider a Solo 401(k) for Self-Employed
Self-employed individuals can take advantage of a Solo 401(k) to contribute more than a traditional 401(k) and reduce their taxable income.
Use a Dependent Care Flexible Spending Account (FSA)
Contribute to an FSA to pay for eligible child or dependent care expenses with pre-tax dollars, reducing your taxable income.
Utilize the Lifetime Gift Exemption
You can gift up to $17,000 (2024 limit) per person annually without incurring gift tax, which can help reduce your taxable estate.
Claim Deductions for Home Office Expenses
If you work from home, you may qualify to deduct home office expenses, such as a portion of your rent or mortgage, utilities, and supplies.
Consider a Tax-Deferred Annuity
Annuities allow you to defer taxes on investment gains until you begin withdrawing funds, which can reduce your current tax burden.
Contribute to a 403(b) if You Work for a Nonprofit
Nonprofit employees can contribute to a 403(b), a retirement account that works like a 401(k) but is typically available to teachers, healthcare workers, and others in the public sector.
Use Tax-Advantaged Accounts for Investments
Invest in tax-advantaged accounts, such as IRAs and 401(k)s, to reduce taxable income and avoid paying taxes on growth until retirement.
Invest in Tax-Efficient Funds
Invest in tax-efficient mutual funds and ETFs that are designed to minimize taxable distributions.
Convert Traditional IRA to Roth IRA
Converting a traditional IRA to a Roth IRA allows for tax-free growth, but you will owe taxes on the conversion amount.
Utilize the Qualified Business Income (QBI) Deduction
If you’re self-employed or own a pass-through business (LLC, S Corp, etc.), you may qualify for a 20% deduction on qualified business income.
Write Off Business Expenses
If you own a business, be sure to track and write off eligible business expenses, including travel, supplies, and even part of your home’s expenses.
Take Advantage of the Adoption Credit
If you adopt a child, you may qualify for a federal tax credit to help cover adoption-related expenses.
Maximize Retirement Plan Contributions for Your Spouse
Contribute to your spouse’s retirement plan, such as an IRA or 401(k), to reduce your combined taxable income.
Reinvest Dividends in Tax-Advantaged Accounts
Reinvest dividends in tax-advantaged accounts like Roth IRAs or 401(k)s to defer taxes and allow your investment to grow without the immediate tax hit.
Invest in Tax-Efficient Real Estate Strategies
Use strategies like cost segregation to accelerate depreciation deductions on real estate investments, which can reduce taxable income.
Use Business Tax Deductions for Freelancers
As a freelancer, claim deductions for work-related expenses, such as office supplies, travel, and other business-related costs.
Consider Tax-Deferred Investment Growth
Explore investment vehicles that allow for tax-deferred growth, such as whole life insurance or variable annuities, for long-term savings.
Consider Filing Jointly if Married
Filing jointly with your spouse can sometimes offer better tax rates and larger deductions, particularly when one spouse earns significantly more than the other.
Track and Deduct Charitable Contributions
Keep records of all charitable donations and claim deductions for contributions to qualified charitable organizations.