7 Ways To Avoid Taxes Legally (Do This NOW!)
In a Nutshell
Tax planning should focus on lifetime tax minimization, not just this year's bill. The highest-impact strategies include maximizing contributions to 401(k)s, IRAs, and HSAs, strategically timing income and Roth conversions during low-income years, and bunching charitable donations to overcome deduction floors. Tax-loss harvesting and proper asset location between accounts also reduce future tax drag.
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A $1.2 million retirement account can eventually force you to take almost $100,000 of taxable income in a single year, whether you need the money or not. Most people only think about how to pay less this year when sometimes the better move is intentionally paying some tax today so you can potentially pay less later.
At the time of this recording, you can contribute $24,500 into most 401k plans. If you're 50 or older, the standard catchup is another $8,000. There's now an even larger catchup for people who are 60 through 63, which is $11,250. For a 55-year-old married person making $150,000 a year who previously put $10,000 into their traditional 401k, increasing to the full $32,500 contribution (using the 50-plus catchup) puts $22,500 more into the account before federal income taxes. If those dollars otherwise would have fallen into the 22% federal bracket, that's roughly $4,950 of current federal income tax deferred.
For this tax year, you can contribute $7,500 to an IRA, plus $1,100 catch-up if you're 50 or older. The catch is that traditional IRA deductibility depends on your income and whether you or your spouse are covered by a workplace plan. Don't just assume the deduction is available.
If you're eligible for an HSA, this might be one of the best tax shelters available to a normal person. Money can go in with a federal tax benefit. The investments can grow without current federal tax, and withdrawals for qualified medical expenses can come out tax-free. For 2026, the contribution limit is $4,400 for self-only coverage and $8,750 with eligible family coverage.
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