By: Sentient Wealth Group
Nobody enjoys paying taxes—but with thoughtful planning, you may be able to keep more of what you earn. Tax planning isn’t just something to think about in April; it’s a year-round strategy that can have a meaningful impact on your long-term financial picture.
Here are four straightforward strategies that can help reduce your tax burden and support your overall financial goals.
1. Make the Most of Tax-Advantaged Accounts
One of the most effective ways to reduce taxable income is by contributing to tax-advantaged retirement accounts like a 401(k), 403(b) or an IRA. Contributions to traditional accounts may lower your taxable income today while allowing your investments to grow tax-deferred over time.
If your employer offers a matching contribution, be sure to take advantage of it. Employer matches are essentially free money and can significantly boost your retirement savings.
2. Give Strategically
Charitable giving can be rewarding both personally and financially. Donations to qualified charities may be tax-deductible, helping reduce your taxable income while supporting causes you care about.
Strategic gifting can also play a role in estate planning. Gifting money to family members may help reduce future estate taxes. Additionally, if you are required to take required minimum distributions (RMDs), donating directly from your IRA to a qualified charity may allow you to satisfy the requirement without increasing your taxable income.
3. Take Advantage of a Health Savings Account (HSA)
If you’re enrolled in a high-deductible health plan, a Health Savings Account can be a powerful tax-planning tool. Contributions are made with pre-tax dollars, growth is tax-deferred, and withdrawals for qualified medical expenses are tax-free.
Unlike flexible spending accounts, HSA funds roll over year after year, making them a valuable long-term savings option for healthcare costs now and in retirement.
4. Use Tax-Loss Harvesting
Tax-loss harvesting involves selling investments that have declined in value to realize a loss. These losses can be used to offset capital gains, potentially reducing the amount of tax you owe.
If your losses exceed your gains, you may be able to deduct a portion against ordinary income and carry remaining losses forward to future years—turning short-term market challenges into long-term tax benefits.
Tax planning works best when it’s proactive and personalized. Small, consistent decisions throughout the year can add up to meaningful savings over time. If you’d like to explore how these strategies fit into your broader financial plan, we encourage you to schedule a meeting with our team.