Are you investing to build a more secure future for yourself and your family? Are you looking to minimize the taxes you pay on those investments?

If so, you are in the right place.

In this article, I will share 6 key strategies with examples that will help you reduce your taxes, so you can keep and grow more of your hard-earned wealth.

Now, let’s get started.

Contributing to Retirement Accounts

To start things off let’s get into Tax Savings Strategy #1 and that’s Contributing to Retirement Accounts.

Contributing to 401(k)s, IRAs and defined benefit plans offer tax-deferred growth, and will lower your taxable income significantly.

In fact, if you work for an employer, you can contribute up to $23,500 in 2025 to your 401(k) tax-free. This is a $500 increase from the 2024 limit.

Now, for my small business owners watching today, I suggest you consider having a Defined Benefit Plan set up for you.

So, what’s a defined benefit plan? A Defined Benefit Plan is unique in that it exists on the company books, and not in the owners’ names like a traditional retirement account.

It operates just like a pension in that it provides a stated annual benefit at the time of your retirement. This benefit is usually based on your salary and years of service, but it can also be based on a cash balance formula.

One of the great things about the Defined Benefit Plan is you don’t necessarily have to work lots of years for your company to be able to benefit from it.
So, how is your monthly payment ot benefit calculated?

A defined benefit plan contribution amount is usually calculated by actuaries in collaboration with your financial planner. They’ll consider key factors like your payroll, age, income, and the number of years until retirement. If you’re a business owner, you have the opportunity to contribute to your retirement plan based on the maximum allowable benefit under IRS rules. For 2025, the maximum contribution per employee is $280,000.
Let me share an example.

One of my clients, a business owner in his late 50s, had not started contributing toward retirement. His S Corporation generated a net income of $200,000, which left him facing a tax bill of $41,063.

By setting up a Defined Benefit Blan, he was able to contribute $200,000 toward his retirement while effectively eliminating that tax bill completely.
Now, here’s the best part: many clients worry about having all the funds ready by December 31st. With a defined benefit plan, you don’t have to fund it all immediately because you have until the tax extension deadline to make the contributions. In this case, we worked together to create a funding plan by the extension deadline, making it a win-win situation for both tax savings and long-term financial planning.

Now, before I reveal Tax Savings Strategy #2, let me share with you the 6 Best Benefits to start a Defined Benefits Plan:

Benefit #1 – Significant Tax Deductions

Contributions to a Defined Benefit Plan are tax-deductible for your business. Since these plans allow for much higher annual contribution limits than other retirement plans, you can reduce your taxable income substantially while funding your future.
For example, depending on your age and income, you could contribute several hundred thousand dollars per year to the plan, compared to the much lower limits of a 401(k) or SEP IRA.

Benefit #2 – Accelerated Retirement Savings

As a business owner, you may have started saving for retirement later than others. A Defined Benefit Plan allows you to “catch up” by making larger contributions over a shorter period, ensuring you can reach your retirement goals quickly.

Benefit #3 – Employee Retention and Motivation

If you have employees, offering a Defined Benefit Plan can help you attract and retain top talent. It’s an excellent incentive that shows your commitment to their long-term financial security, which can improve loyalty and reduce turnover.

Benefit #4 – Customizable to Your Needs

Defined Benefit Plans can be tailored to prioritize benefits for the owner while offering meaningful contributions to employees. This flexibility ensures you’re maximizing your retirement savings while meeting your business goals.

Benefit #5 – Estate Planning and Legacy

These plans can also be part of your estate planning strategy. By accumulating significant funds in the plan, you can secure your retirement income and leave a financial legacy for your heirs.

And last but not least…

Benefit #6 – Mitigates Investment Risk

As the plan sponsor, your business will fund the plan, but the benefits are predetermined, providing you with predictable income in retirement. You’ll avoid the uncertainty of relying solely on market performance in most other retirement plans.

In short, a Defined Benefit Plan allows you to combine tax efficiency with accelerated savings, making it an excellent choice for business owners who want to secure their financial future while benefiting both their company and employees. It’s especially advantageous for high-earning business owners looking for a long-term retirement and tax savings solution.

And what is best about it is you can fund this into the following year up to September 15, if you are a corporation. Just think about cash flow availability before you fund the plan!

Now, let’s get back to our tax savings strategies.

Tax Savings Strategy #2 – Health Savings Accounts, also known as HSAs

HSAs are one of my favorite tax strategies and do you know why? They are one of the few tax strategies that actually provide triple tax advantages.

With HSAs, contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are also tax-free.

Here’s a practical example of how they work.

If your taxable income is $60,000 and you contribute $4,150 to an HSA (the 2024 individual limit), your income is reduced to $55,850. This contribution saves you money immediately. – about $607 in taxes.

Now, you can pay for qualified medical expenses like doctor visits, prescriptions, or even dental and vision care. Each year the amount you can contribute typically increases becuase the IRS increases the savings limits.

It’s also worth noting that any unused balance will continue to grow tax-free for future medical expenses.

Tax Savings Strategy #3 – Municipal Bonds

In the world of investing, it’s common to hear investment options like 401Ks, HSAs, Roths, stocks, precious metals, CDs and high yield savings accounts. But there’s one tax-free option that most people miss.

And that’s municipal bonds. What’s so unique about municipal bonds?

Municipal bonds provide you tax-free interest income. This often makes them attractive for high-income earners.

This is how they work. For example, an investor purchases $50,000 in municipal bonds with a 3% annual interest rate, thus earning $1,500 of tax-free income annually.

Imagine if they did that for 20 years, they would earn $30,000 tax free while maintaining their $50,000 initial investment.

Not only is this income exempt from federal taxes but, in some cases, state taxes too, but this all depends on the bond issuer.

Tax Savings Strategy #4 – Real Estate Investments

Real estate investments often scare people off because they feel like they can barely afford the home they’re in.

Little do they know that by investing in real estate they can receive substantial tax advantages, including mortgage interest deductions, depreciation deductions, even if the property appreciates, and you also have the ability to deduct operating expenses such as repairs and property management.

Here’s an example of how purchasing real estate as an investment property can play out.

Imagine if you, the investor, buys a $300,000 rental property and rents it for $2,000/month. That’s a total annual rental income of $24,000.

This is where the magic of deductions come into play.

For the first deduction, we will start with depreciation, but we cannot depreciate the full $300,000 because land is not depreciable.

Instead we will allocate an estimated cost of the land, and in this case, it’s $50,000.

That now leaves the depreciable value at $250,000.

From there, we can depreciate the rental property over 27.5 years, which is the maximum allowable time. Doing this creates a $9,091 annual depreciation deduction.

Now, let’s take alook at how this plays out on your yearly taxes.

For depreciation, we just calculated and already know we will receive the $9,091 annual depreciation deduction.

Mortgage interest is also deductible. And in this case, we will be deducting $12,000 in mortgage interest for the year.

For additional operating expenses like property taxes, repairs, cleaning, general maintenance, etc will be at $6,500 for the year

The total deduction of all these expenses add up to $27,591.

So if we subtract our $27,591 from our $24,00 in rental income that leaves us with a paper loss of $3,591. That completely offsets our rental income, while reducing taxable income.

But what if we sell that property after 10 years? How does that look?

If the house appreciates and sells for $450,000, you will have a $150,000 in capital gains.

Next we have a wonderful way of avoiding paying taxes on these gains. In order to avoid paying the taxes on the $150,000 in gains, we will use what is known as a 1031 exchange which will allow us to reinvest the proceeds in another investment property to continue to build wealth tax-efficiently.

Tax Savings Strategy #5 – Tax-Loss Harvesting

With this next tax savings strategy, we are digging deep into our bag of tax savings tips. It’s safe to say 99% of Americans have never heard of this next tax savings strategy before.

This is how it works.

An investor sells off some stock and makes $5,000 in capital gains, but he would rather not have to pay taxes on his profits.

To offset the $5,000 in capital gains, he sells off some underperforming stock for a $5,000 loss. By doing this, he eliminates all of the taxes on the gains thus reducing his taxable income to zero.

Here is a another example of how tax loss harvesting works.

Let’s say we sell some stock and have $5,000 in capital gains.

To offeset these gains, we sell $10,000 at a loss on some underperforming stocks.

We take the $5,000 gain – the $10,000, and that leaves us with a $5,000 loss.
Unfortunately we cannot write off the full $5,000 immediately however the IRS allows us to deduct $3,000 in losses the first year and then carry forward the additional $2,000 loss to the following year.

Now, it’s important to note. And please, please, please remember this!

If you switch tax professionals when you are in the middle of using this “carry forward strategy” you can get burned.

Why is that? It’s because your next accountant probably won’t know about it.

To avoid this, please make it a priority and provide the tax return with all the supporting schedules showing the carry-forward amount to your new accountant.

Tax Savings Strategy #6 – Charitable Contributions

Do you have a favorite cause, church or non-profit organization?

Charitable donations to qualified organizations are yet another tax-deductible strategy to reduce taxable income while supporting your favorite cause.

Here are two examples of how charitable contributions can lower your tax liability.

Example #1 is pretty simple and straight forward – For this example, a donor in the 24% tax bracket contributes $10,000 to a local charity, thus reducing their tax liability by $2,400.

This is a pretty good move on their part, but I have an even better startegy for you that will cost the donor far less.

Example #2 – Let’s say you invested in stock $5,000 and you donate this stock that now has a fair market value or FMV of $10,000.

You will lower your tax liability by $2,400, if we assume you are in the 24% tax bracket.

The most importanat thing to remember in this example is that you did not spend $10,000. You only spent $5,000 to acquire the stock yet you are getting the tax benefit as if your spent the $10,000 rather than $5,000.

By donating this stock you received a higher tax benefit because of the FMV rules on appreciated stock when it is donated.

These strategies, when tailored to individual circumstances, can provide significant tax savings while helping to achieve financial goals.

Whether it’s through reducing income, leveraging deductions, or deferring taxes, consulting a financial or tax advisor is essential to maximize these benefits.

I hope you have found this video helpful and if you follow these 7 tax savings strategies closely, you will be sure to lower your tax bill significantly.

Get Your Free Estimate

If you don’t already know me, my name’s Sonia Narvaez. I’m a licensed CPA and wealth building strategist with over 25 years experience.

And if you have any questions about how to take advantage of any of these tax savings strategies, book your FREE estimate with a member of my team, simply click this scheduling link, and pick the time that works best for you.

We would love to help and meet with you.