10 Moves to Help Cut Your Tax Bill Next Year and Grow Your Net Worth Along the Way

1.) Choose When You Want to Pay Taxes (Qualified Plan Contributions)

Do you want the tax break now or in retirement?

• Traditional 401(k)/IRA: Reduce taxes today; pay later in retirement (subject to RMDs at age 73)
• Roth 401(k)/IRA: Pay tax now; enjoy tax-free growth and no required withdrawals later

General Rule of thumb:

• If you’re in a lower income bracket now, Roth may make more sense
• If your marginal tax rate is 32% or higher, you may benefit more from pre-tax savings today

2.) Backdoor Roth IRA Contributions

If you earn too much to contribute directly to a Roth IRA (2025 income phaseout begins at $246K for married couples), this workaround still allows you to get money into a Roth:

1. Make a non-deductible Traditional IRA contribution
2. Convert it to a Roth IRA
3. File Form 8606 to report it properly

Note: Be aware of the pro-rata and IRA aggregation rules before moving forward.

3.) Get Intentional About Asset Location

Tax-smart investing isn’t just what you buy — it’s where you hold it.

• High-growth assets → Roth accounts (maximize tax-free growth)
• Conservative, income-producing assets → Pre-tax accounts (you’ll pay tax later anyway)
• Tax-efficient investments → Taxable brokerage (like index ETFs or municipal bonds)

4.) Mega Backdoor Roth (If Your Plan Allows It)

If your workplace 401(k) plan supports after-tax contributions and in-plan Roth conversions, you could save significantly more to Roth than the standard limits allow.

This is an advanced strategy, but powerful for high earners who want more tax-free retirement growth.

5.) Roth Conversions in Low-Income Years

If you’re having a year with unusually low income (job transition, sabbatical, retirement gap year), consider converting part of your traditional IRA or 401(k) to Roth.

• Pay tax at a lower rate now
• Get permanent tax-free growth going forward
• Eliminate future RMDs on that balance

6.) Maximize an HSA (Triple Tax Advantage)

If you’re covered by a high-deductible health plan, a Health Savings Account (HSA) is one of the most powerful — and underutilized — tax tools available:

• Contribute pre-tax (2025 limits: $8,550 family / $4,300 individual; +$1,000 catch-up if over age 55)
• Grow investments tax-free
• Withdraw tax-free for qualified medical expenses — anytime

Pro tip: Pay out-of-pocket for current medical costs and let your HSA grow untouched. Keep receipts. You can reimburse yourself years later — tax-free.

What if you don’t need the funds for health related expenses?

That’s where the real power shows up:

• At age 65, you can withdraw funds for any reason — not just medical — without penalty (though non-medical withdrawals are taxed as ordinary income)
• If used for qualified medical expenses, withdrawals remain completely tax-free
• Can also be used for Medicare premiums, long-term care, or supplemental insurance

In short: an HSA can double as a stealth retirement account — especially valuable if you stay healthy and let it grow.

7.) Tax Loss Harvesting

If you own investments that are down in value, use them to offset gains or income.

Example:

• You bought a stock at $10,000, now worth $6,000
• Sell it and lock in a $4,000 loss
• Use that loss to offset gains elsewhere, or reduce ordinary income up to $3,000

Just be sure to avoid the wash sale rule if you plan to re-enter that position.

8.) 529 Plan Contributions for Education

College savings can also reduce your tax bill — depending on where you live.

• Over 30  states (e.g., Minnesota) offer deductions for contributions
• 5  states (e.g. MN, IN, OR, UT, & VT) offer state tax credit
• All growth is tax-deferred, and withdrawals are tax-free if used for education

Bonus: Under Secure Act 2.0, $35,000 of unused funds may be rolled into a Roth IRA for the beneficiary (subject to income requirements & annual limits).

Source: https://www.investopedia.com/articles/investing/112015/review-vanguard-529-college-savings-plan.asp

9.) Charitable Giving – The Smart Way

Generosity and tax planning can go hand-in-hand:

• Open a Donor-Advised Fund (DAF) to get a deduction now and give over time
• Donate highly appreciated stock instead of cash
• Bunch donations into one year to exceed the standard deduction threshold

Ideal in high-income years or when selling a large asset.

10.) Equity Compensation Planning

If you receive equity from your employer — RSUs, ISOs, NSOs, or ESPPs — proper planning can save you thousands in taxes and reduce risk.

• Understand when shares vest, when to exercise options, and how gains are taxed
• Coordinate with your broader financial plan to manage risk and avoid concentrated positions
• Diversifying at the right time can reduce taxes and increase long-term performance

Final Word

Next year’s tax bill is being written today, tomorrow and every day moving forward— not next March. Now is the time to start proactively planning ahead.

Whether you’re a business owner, high earner, executive, or athlete, these strategies can help you reduce what you owe while increasing what you own.

If your current team is more reactive than proactive — or if you’d like a fresh set of eyes on your plan — let’s talk.

Sources and References

Investopedia.com https://www.investopedia.com/articles/investing/112015/review-vanguard-529-college-savings-plan.asp

Nerdwallet.com –https://www.nerdwallet.com/article/taxes/tips-save-taxes