How to Save on Taxes

Taxes are usually the largest expense in a household budget. Most people just accept whatever comes out of their paycheck. A little tax literacy can save thousands per year — entirely legally. This is the basics, not a CPA replacement.

Always consult a tax professional for your specific situation; below are the common levers worth knowing.

1. Max out 401(k) contributions

Every dollar into a traditional 401(k) reduces your taxable income now. $23,500 max in 2026. If your employer matches, that’s free money. Single biggest tax lever for most W-2 employees.

2. Use an IRA

Traditional IRA = tax deduction now, taxed at withdrawal. Roth IRA = no deduction now, tax-free growth forever. $7k/year limit in 2026. Most people should have one of these in addition to 401(k).

3. HSA if you’re eligible

Triple tax-advantaged: tax deduction on contributions, tax-free growth, tax-free withdrawals for medical. The best account type that exists. Requires a high-deductible health plan.

4. Take every deduction you qualify for

Student loan interest, mortgage interest, state/local tax (capped at $10k), charitable donations, medical over 7.5% of AGI. Itemize when deductions exceed the standard deduction ($15k single, $30k joint in 2026).

5. Tax credits > deductions

Credits reduce tax directly, dollar for dollar. Child tax credit, education credits, EV credit, home energy credits. Less glamorous than deductions but often worth more.

6. Harvest losses

In taxable investment accounts, sell losers to offset gains. Up to $3,000 of excess losses deduct against ordinary income. Be aware of wash sale rules — don’t buy back the same security within 30 days.

7. Hold investments long-term

Long-term capital gains (over 1 year) are taxed at 0-20%. Short-term are taxed as ordinary income (up to 37%). Waiting an extra month can save tens of thousands on large holdings.

8. Self-employed: the SEP or Solo 401(k)

If you have freelance or business income, you can contribute massive amounts (up to $70k in 2026) pre-tax. Among the biggest tax shelters available. Worth the paperwork.

9. Business expenses if you freelance

Home office, computer, software, internet portion, mileage. All deductible against self-employment income. Keep receipts. This alone can save thousands a year for side hustlers.

10. Hire a good CPA

For simple returns, TurboTax is fine. For anything complex — business, RSUs, real estate, multiple states — a good CPA pays for themselves 5-10x. See business guide and income guide.