Tax Planning
15 Tax Saving Strategies for Investors
Every legal tax reduction strategy I use, ranked by impact and difficulty. From one-click 401(k) moves to advanced QOZ funds.
Updated April 2026 · ~16 min read
Quick Summary
The US tax code is over 6,800 pages. Most of it is irrelevant to you. What matters are the handful of provisions Congress created to incentivize saving, investing, and charitable giving.
These are not loopholes. They are features of the system, explicitly designed by lawmakers. The people who use them save thousands to tens of thousands per year. The people who don't are essentially volunteering to pay a higher rate than legally required.
Below are the 15 strategies I use or have used, ranked by impact. I am not a CPA. I am an engineer-turned-hedge-fund-manager who has spent way too much time reading the tax code. The disclaimer at the bottom applies.
All 15 Strategies at a Glance
| # | Strategy | Impact | Difficulty | Annual Savings |
|---|---|---|---|---|
| 1 | Max Out Your 401(k) | Very High | Easy | $3,500 – $8,700 |
| 2 | Fund Your HSA | High | Easy | $1,000 – $3,200 |
| 3 | Backdoor Roth IRA | High | Moderate | $10,000 – $100,000+ lifetime |
| 4 | Tax-Loss Harvesting | High | Moderate | $1,000 – $15,000+ |
| 5 | Mega Backdoor Roth | Very High | Advanced | $46,000+ per year into Roth |
| 6 | Charitable Giving of Appreciated Stock | High | Moderate | $3,000 – $50,000+ |
| 7 | 529 Education Savings Plan | Moderate | Easy | Varies by state ($500 – $5,000 deduction) |
| 8 | Asset Location Strategy | High | Moderate | 0.5% – 1.0% of portfolio/year |
| 9 | Long-Term Capital Gains Treatment | Very High | Easy | $5,000 – $22,000+ per sale |
| 10 | Qualified Opportunity Zone (QOZ) Funds | Very High | Advanced | 100% of QOZ appreciation tax-free |
| 11 | Donor-Advised Fund (DAF) Bunching | Moderate | Moderate | $1,000 – $10,000+ |
| 12 | Roth Conversion Ladder | Very High | Advanced | $5,000 – $20,000+ per conversion |
| 13 | S-Corp Election | Very High | Advanced | $5,000 – $25,000+ |
| 14 | Tax-Efficient Withdrawal Sequencing | High | Moderate | $3,000 – $15,000+/year in retirement |
| 15 | Stepped-Up Basis at Death | Very High | Easy | 100% of unrealized gains eliminated |
Max Out Your 401(k)
Contribute up to $23,500 pre-tax (2026) to your employer-sponsored plan. Reduces taxable income dollar-for-dollar.
How It Works
Every dollar contributed to a traditional 401(k) is deducted from your taxable income before you pay federal and state taxes. At a 24% marginal rate, maxing out saves $5,640 in federal taxes alone. Add a 5% state rate and you save $6,815. Employer matching is additional free money.
Glen's take: This is the single easiest tax move in America. If your employer matches, contribute at least enough to get the full match — anything less is leaving free money on the table.
Fund Your HSA
The only account with triple tax advantage: deductible contributions, tax-free growth, tax-free withdrawals for medical expenses.
How It Works
Contribute $4,300 (individual) or $8,550 (family) in 2026. If contributed via payroll, you also avoid 7.65% FICA taxes. Invest the balance — most HSA providers offer Vanguard/Fidelity index funds. Pay medical expenses out-of-pocket, save receipts, reimburse yourself decades later. After 65, withdrawals for any purpose are penalty-free (just taxed as income, like an IRA).
Glen's take: The HSA is the most underrated account in the entire tax code. I pay all medical bills out-of-pocket and let the HSA compound. In 20 years it will be worth multiples of what I contributed.
Backdoor Roth IRA
Contribute to a non-deductible traditional IRA, then convert to Roth. Tax-free growth and withdrawals forever — regardless of income.
How It Works
Step 1: Contribute $7,000 (2026 limit) to a traditional IRA. Don't deduct it. Step 2: Convert to Roth IRA immediately. Since you already paid taxes, the conversion is tax-free — as long as you have no other pre-tax IRA balances (the pro-rata rule). File Form 8606. Repeat every year.
Glen's take: I do this every single year. It takes 15 minutes. If you have pre-tax IRA money, roll it into your 401(k) first to avoid the pro-rata trap.
Tax-Loss Harvesting
Sell losing investments to offset capital gains. Deduct up to $3,000 in excess losses against ordinary income. Carry forward forever.
How It Works
Identify positions at a loss in your taxable brokerage account. Sell them to realize the loss. Immediately reinvest in a similar (but not identical) ETF to maintain market exposure. Short-term losses offset short-term gains first (most valuable). The wash sale rule prevents buying back the same security within 30 days.
Glen's take: You don't need a bad year to harvest losses. Even in a bull market, individual holdings dip. I harvest losses year-round, not just in December.
Mega Backdoor Roth
After-tax 401(k) contributions converted to Roth — the most powerful Roth funding strategy if your plan allows it.
How It Works
Total 401(k) limit is $70,000 (2025). After your employee contribution ($23,500) and employer match, the remaining room can be filled with after-tax contributions. Then convert those after-tax dollars to Roth via in-plan conversion or rollover to Roth IRA. Not all plans allow this — check with HR.
Glen's take: If your employer's plan supports this, it is the single most powerful tax strategy available. $46K/year into a Roth adds up fast.
Charitable Giving of Appreciated Stock
Donate appreciated stock held 1+ years: deduct the full market value AND avoid capital gains tax on the appreciation.
How It Works
If you bought stock at $20 and it is now worth $100, donating it lets you deduct $100 as a charitable contribution while avoiding the $80 capital gain entirely. Double benefit. You can deduct up to 30% of AGI for appreciated property donations. Carry forward unused deductions for 5 years.
Glen's take: Never donate cash if you have appreciated stock. The stock donation gives you the same deduction PLUS avoids the capital gains tax. The math is strictly better.
529 Education Savings Plan
Tax-free growth and tax-free withdrawals for education expenses. Many states offer a state tax deduction for contributions.
How It Works
Contribute to a 529 plan (no federal deduction, but 34 states offer a state tax deduction or credit). Investments grow tax-free. Withdrawals for qualified education expenses (tuition, books, room/board, K-12 up to $10K/year) are completely tax-free. Starting 2024, unused 529 funds can be rolled into a Roth IRA for the beneficiary (up to $35,000 lifetime, subject to annual Roth limits).
Glen's take: The 529-to-Roth rollover is a game changer. If your kid gets a scholarship, you're not stuck — roll the unused funds into their Roth IRA and give them a massive head start on tax-free retirement savings.
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Asset Location Strategy
Put tax-inefficient investments (bonds, REITs) in tax-sheltered accounts and tax-efficient investments (index funds) in taxable accounts.
How It Works
Different investments generate different types of taxable income. Bond interest is taxed at ordinary income rates (up to 37%). Qualified dividends and long-term gains are taxed at 0-20%. By placing high-tax-drag investments in your IRA/401(k) and low-tax-drag investments in taxable accounts, you minimize the total tax bite on your portfolio.
Glen's take: This is the free lunch of investing. Same portfolio, same risk, same expected return — just higher after-tax returns because of where you put things.
Long-Term Capital Gains Treatment
Hold investments for more than one year to qualify for the 0/15/20% long-term capital gains rate instead of the 10-37% short-term rate.
How It Works
The tax code rewards patience. Assets held for 366+ days qualify for preferential long-term capital gains rates. The difference between the 37% short-term rate and the 15% long-term rate on a $100K gain is $22,000 in tax savings. Some taxpayers even qualify for the 0% rate on long-term gains.
Glen's take: If you are sitting on a gain and it has been 11 months — wait. One more month changes the tax treatment dramatically. I've seen people sell on day 364 and regret it.
Qualified Opportunity Zone (QOZ) Funds
Invest capital gains into a QOZ fund: defer the original gain and pay zero tax on the QOZ fund's appreciation if held 10+ years.
How It Works
When you realize a capital gain, you can invest that gain amount into a Qualified Opportunity Zone fund within 180 days. The original gain is deferred until 2026 (or sale of QOZ investment, whichever comes first). If you hold the QOZ investment for 10+ years, all appreciation on the QOZ investment is completely tax-free. This is one of the most powerful tax incentives in the code.
Glen's take: QOZ funds are complex and illiquid — you're locked in for 10 years to get the full benefit. But for large capital gains, the math is compelling. Make sure you work with a CPA who specializes in QOZ compliance.
Donor-Advised Fund (DAF) Bunching
Bunch multiple years of charitable giving into one year to itemize deductions, then take the standard deduction in other years.
How It Works
If your annual charitable giving isn't enough to exceed the standard deduction ($15,000 single / $30,000 married in 2026), you can 'bunch' 3-5 years of giving into a single year by contributing to a Donor-Advised Fund. That year, you itemize and claim the large deduction. In the other years, you take the standard deduction. The DAF distributes grants to charities on your schedule.
Glen's take: This is the strategy that makes the standard deduction work in your favor instead of against you. Contribute 3 years of giving to a Fidelity Charitable DAF in one shot, itemize that year, standard deduction the next two years.
Roth Conversion Ladder
Convert traditional IRA money to Roth in low-income years to lock in low tax rates and build tax-free retirement income.
How It Works
In low-income years (early retirement, sabbatical, career gap), convert traditional IRA money to Roth up to the top of the 12% or 22% bracket. You pay a small tax now to avoid a larger tax later. Each conversion has a 5-year clock before penalty-free withdrawal. After 5 years of conversions, you have a self-sustaining income pipeline.
Glen's take: The gap years between retirement and Social Security/RMDs are golden. Your taxable income is naturally low — that's when you convert aggressively at the 12% or 22% rate.
S-Corp Election
Self-employed income above a reasonable salary avoids the 15.3% self-employment tax via S-Corp distribution treatment.
How It Works
As a sole proprietor or single-member LLC, you pay 15.3% self-employment tax on all business profits. With an S-Corp election, you pay yourself a reasonable salary (subject to employment taxes) and take remaining profits as distributions (not subject to SE tax). On $200K net income with a $100K salary, you avoid SE tax on $100K — saving roughly $15,300/year.
Glen's take: The S-Corp election saved me a small fortune when I was running my hedge fund. The 'reasonable salary' requirement is the key — pay yourself enough that the IRS won't challenge it, but not so much that you lose the tax benefit.
Tax-Efficient Withdrawal Sequencing
Withdraw from taxable, traditional, and Roth accounts in the optimal order to minimize lifetime taxes in retirement.
How It Works
The conventional wisdom (taxable first, then traditional, then Roth) is a starting point but not always optimal. The key: in low-income years, draw from traditional accounts to 'fill up' low brackets. In high-income years, draw from Roth. Use taxable accounts to bridge gaps. The goal is to spread tax liability evenly across retirement to avoid spikes that push you into high brackets or trigger Medicare IRMAA surcharges.
Glen's take: Most retirees have no strategy for withdrawal sequencing. They just withdraw from whatever account is convenient. A CPA or fee-only financial planner can save you tens of thousands over a 30-year retirement by optimizing the sequence.
Stepped-Up Basis at Death
When you die, your heirs receive assets at the current market value — all unrealized capital gains are permanently wiped out.
How It Works
If you bought stock at $10 and it is worth $200 when you die, your heirs' cost basis is $200. They can sell immediately with zero capital gain. This makes 'buy and hold forever' the ultimate tax strategy for wealth transfer. Note: this does not apply to inherited IRAs (those are always taxable) — it applies to taxable account assets.
Glen's take: This is why Warren Buffett never sells. The stepped-up basis is the most powerful capital gains strategy in the entire tax code. If you have highly appreciated assets in a taxable account, consider whether selling is truly necessary.
Where to Start: A Prioritized Checklist
- 1.Get the full employer 401(k) match (free money)
- 2.Max out your HSA if eligible ($4,300 individual / $8,550 family)
- 3.Max out your 401(k) to $23,500
- 4.Do a backdoor Roth IRA ($7,000)
- 5.Set up tax-loss harvesting (manual or automated)
- 6.Optimize asset location (bonds in IRA, stocks in taxable)
- 7.Check if mega backdoor Roth is available in your plan
- 8.If self-employed: evaluate S-Corp election with a CPA
Recommended Resources
Tools & books I actually use and recommend
Interactive Brokers
Low commissions, global market access, and professional-grade tools. This is where I hold my positions.
Open an AccountThe Psychology of Money
Morgan Housel on why managing money is about behavior, not intelligence. Short, brilliant chapters you'll re-read.
View on AmazonA Random Walk Down Wall Street
Burton Malkiel's classic case for index investing. The book that convinced millions to stop stock-picking.
View on AmazonSome links above are affiliate links. I only recommend products I personally use. See my full disclosures.
Frequently Asked Questions
What is the single best tax saving strategy?
For most W-2 employees, maxing out your 401(k) at $23,500 (2026) is the highest-impact, lowest-effort tax move. At a 24% federal rate, that saves $5,640 in federal taxes immediately. If you also have access to an HSA, adding $4,300 saves another $1,032+. Those two moves alone can save $6,672+ per year in federal taxes with zero complexity.
How do I know which tax strategies apply to me?
Start with your employment status: W-2 employees should focus on 401(k), HSA, and backdoor Roth. Self-employed individuals should add S-Corp election, SEP IRA, and home office deductions. Investors with taxable accounts should focus on tax-loss harvesting, asset location, and long-term capital gains treatment. High earners with large gains should explore QOZ funds and charitable giving of appreciated stock.
Are these tax strategies legal?
Yes, every strategy on this page is legal, well-documented, and used by millions of Americans. They are explicitly authorized by the Internal Revenue Code. Tax evasion (hiding income, lying on your return) is illegal. Tax avoidance (using legal strategies to minimize your tax bill) is not only legal — it is exactly what Congress intended when they wrote these provisions into the tax code.
How much can I realistically save on taxes?
A typical household earning $150,000 can save $8,000–$15,000 per year by using just 3-4 strategies from this list (max 401(k), fund HSA, backdoor Roth, tax-loss harvesting). Higher earners with more complex situations (S-Corp, real estate, charitable giving) can save $20,000–$50,000+ per year. The key is consistency — doing these every year compounds the benefit.
Should I hire a CPA or do this myself?
If your situation is simple (W-2 income, standard deduction, basic investing), you can implement most of these strategies yourself with good tax software. If you are self-employed, have rental properties, own a business, make over $250K, or have complex investment situations, a CPA who specializes in tax planning (not just tax preparation) will likely save you more than they cost. The best CPAs are proactive — they suggest strategies before year-end, not after.
When should I start tax planning for the year?
January, not December. Most tax strategies require action throughout the year — 401(k) contributions are spread over 12 months, tax-loss harvesting should happen whenever opportunities arise, estimated tax payments are quarterly. If you wait until December, you have missed most of the opportunities. Do a mid-year tax review in June to course-correct.
The Bottom Line
You do not need to use all 15 strategies. Most investors can save thousands per year with just three moves: max your 401(k), fund your HSA, and do a backdoor Roth. Add tax-loss harvesting and asset location and you are in the top 5% of tax-efficient investors.
The tax code rewards people who plan ahead. Every strategy on this page is legal, well-documented, and used by millions of Americans. The only difference between people who use them and people who don't is awareness.
You earned the money. Learn the rules. Keep more of it.
Disclaimer: This is educational content, not tax advice. Tax laws change frequently. Consult a qualified CPA or tax professional for advice specific to your situation. Glen Bradford is not a CPA, enrolled agent, or tax attorney.
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