Nobody likes a surprise tax bill (or a bigger one than expected). The good news? While everyone’s financial situation is different, there are proven ways to lower your taxable income and keep more of your money.

Here are seven of my favorite strategies, straight from a CPA and financial planner who has seen firsthand how powerful these can be.

1. Save For Retirement

Contributing to your employer provided retirement plan (401K, 403b, 457, etc.) will transfer pre tax money into your retirement account. These contributions often (unless Roth) will reduce your taxable income and thus lower your tax bill.

• Example: If your salary is $100,000 and you contribute $10,000 to your Traditional 401K, you’ll only be taxed on $90,000 of income, not the full $100,000.

Not only does this lower your current tax bill, but it also grows your retirement savings tax deferred meaning that you won’t pay tax on it for years from now when you start taking distributions. 

If your employer offers a match, contribute at least enough to get the full match. That’s free money and part of your compensation.

2. Use Tax Advantaged Accounts (FSA, HSA, Dependent Care FSA)

The IRS provides a number of different opportunities for taxpayers to shift pre tax money to other vehicles such a Flexible Spending Account (FSA), a Health Savings Account (HSA) and a Dependent Care Flexible Spending Account (DFSA). Again, shifting those pre-tax dollars away reduces your taxable income. 

So, IF your employer offers these types of accounts, you might want to take advantage of them, if you’re eligible to, in order to lower your tax bill.

• FSA: Covers qualified healthcare costs, but oftentimes funds must be used within the plan year, depending on your employer plan

• HSA: Only available if you’re on a high deductible health plan. Contributions go in tax free, grow tax free, and withdrawals for qualified medical expenses are tax free (a triple tax benefit). Learn more about Health Savings Accounts here. 

• Dependent Care FSA: Covers eligible childcare (like daycare, preschool, summer day camps) or adult dependent care expenses. 

NOTE: You are typically NOT able to contribute to both a Flexible Spending Account AND a Health Savings Account. Confirm with your employer as it will be dependent on their FSA plan.

3. Save for College with a 529 Plan

A 529 College Savings Plan lets you invest for future education expenses while enjoying tax free growth on contributions and earnings (if used for qualified expenses).

While contributions aren’t federally deductible, many states offer tax deductions or credits. That’s money back in your pocket today, while still saving for your child’s (or even your own!) education.Refer to a previous blog post for more information on 529 College Savings plans.

4. Consider Tax Loss Harvesting

Markets go up and down and sometimes way down. Tax loss harvesting allows you to turn investment losses into a tax benefit. By selling an investment at a loss, you can offset taxable gains or deduct up to $3,000 against ordinary income.

Just be mindful of the wash sale rule: you can’t repurchase the same or “substantially identical” security within 30 days before or after the sale.

And remember that this only applies to taxable investment accounts – not retirement or tax advantaged accounts. 

5. Self-Employed? Open a Solo 401k or SEP IRA

Business owners and freelancers have powerful retirement options like a Solo 401k or SEP IRA. These accounts allow you to put away significant amounts for retirement and reduce your taxable business income.

Think of it as rewarding yourself twice: you’re saving for the future and also lowering your tax bill today.

6. Charitable Giving

If you itemize deductions, donating to qualified charities can lower your tax bill. Contributions don’t just mean cash, you can donate household items, appreciated stock, or even property.

Donating appreciated securities is especially powerful: you avoid paying capital gains tax on the growth, and still deduct the fair market value.

7. Maximize Business Deductions

If you’re self-employed or receive a 1099, you can deduct reasonable business expenses like:

• Supplies

• Software

• Travel & mileage

• Home office expenses

• Cell phone & internet

Be intentional and don’t spend just to get a write off. But if you already need the equipment or supplies, making the purchase before year end can reduce your taxable income.

Intentionally Direct Your Money & Lower Your Tax Bill

Lowering your tax bill isn’t about cutting corners, it’s about using the tax code to your advantage. Whether it’s saving for retirement, funding an HSA, or maximizing your business deductions, these strategies put more money back in YOUR pocket, less to Uncle Sam and keep you moving toward your financial goals.

 If you’re ready to be proactive and align your tax strategy with your bigger financial picture, apply to schedule a call with me here. As a CPA, financial planner, and RIA, I help clients look at the full picture, so your money isn’t just managed, it’s maximized.