Tax Planning for Real People: 6 Ways to Keep More of What You Earn
“What is tax planning?
Tax planning is the process of making financial decisions throughout the year to reduce your tax burden legally—so you don’t pay more than you owe at filing time.”
If your eyes kind of glaze over when you hear the word “taxes”, you are not alone. Although the word clocks in with five letters, our society treats it more like a four-letter word. Lucky for you, I’ve built up a tolerance to it (I grew up with a lot of accountants in my family, haha), and am here to help!
I often hear: “how is the tax planning that you do as my financial advisor different from my CPA?” Well, most people see their CPAs in March when they drop off a pile of paper and hope for the best. This is called tax filing. Tax planning is something you do all year long.
Tax planning is proactive & intentional: it happens before the end of the tax year. And it can quietly add thousands of dollars back into your future without requiring you to change your entire life.
“But what if I’m not rich?”
There’s a myth that tax strategy is only for the wealthy or business owners with fancy accountants. Nope.
If you:
Earn income
Have a retirement account
Own a home
Run a business or side hustle
Invest (even a little)
Care about funding the future you actually want
…then tax planning is already part of your financial life. The question is whether it’s happening on purpose.
The tax code isn’t just a set of rules — it’s a list of opportunities and many wealthy people have figured out how to use it to their advantage. Strategies like retirement savings, charitable giving, education planning, business deductions, Roth IRA conversions and timing your income are available to most.
These tactics are available to every tax bracket and a fiduciary financial planner can help you seek & find the best strategies for your unique situation.
What Proactive Tax Planning Actually Looks Like
Good planning means your advisor and your CPA collaborate before the year closes. I like to review tax planning with clients in the Fall to update our estimates and look for year-end opportunities. Here are some strategies with examples that I’ve seen with actual clients.
1. Choose the right buckets
I like to tell my clients that I help them put the “right amounts in the right accounts”. Roth IRA, 401(k), SEP, solo 401(k), HSA, brokerage — the account you use determines when and how you're taxed.
Example:
I typically advise clients who qualify for Roth IRA contributions (if your income doesn’t exceed the IRS limits for your filing status) to contribute to their 401k first up to their employer match, THEN max out their ROTH IRA. If there is more savings available, go back to your 401k with the rest up to the maximum.
Fully maxing out your 401k (and skipping the Roth IRA) might seem like the best way to save on taxes because the tax deduction is higher in this tax year, however the Roth IRA contribution is actually more valuable to your lifetime wealth because of the tax-free earnings growth.
2. Use the brackets, don’t fear them
You don’t need to avoid taxes; you need to optimize them. Sometimes that means intentionally realizing income now. Other times it means deferring, converting, or harvesting losses. Timing and managing income tax bracket thresholds really matter.
Example:
One of my clients recently had a tax year with really high health care expenses (including new braces for their teen!). If your medical expenses are more than 7.5% of your AGI in any one tax year, you can deduct them (assuming you itemize).
We identified this opportunity in the summertime and the family is now planning to pull forward some of their healthcare spending into the current tax year and also find more ways to lower their adjusted gross income by year end. By simultaneously increasing the healthcare expenses and lowering the income, we hope to hit the 7.5% threshold and save them thousands.
3. Coordinate with your life, not just your paycheck
Switching jobs, selling a property*, starting a business**, having a baby, going part-time — these aren’t just life changes. They’re tax planning windows.
Example:
Years where you earn less income than normal, perhaps because of a sabbatical, leave or change of careers can be a great opportunity to fill up your tax bracket with Roth conversions and realize capital gains when you are in the 0% capital gains bracket.
*For clients who are real estate investors, there is a whole other level of tax strategy to unlock. **Same with business owners.
“Welcome little one, and thanks for the $2,000 tax credit”
4. Harvest losses (or gains) on purpose in your brokerage accounts
Most people sell investments reactively — when the market drops or they need cash. But strategically realizing gains or losses can lower your tax bill or rebalance your portfolio without creating a capital gains tax bill.
Some strategies here include tax loss harvesting, where you sell your losing positions to offset realized gains from winners. If you have more losses than gains in one tax year, you can deduct up to $3,000 of losses from your taxable income.
Example:
If you already plan on doing some Roth conversions in a certain tax year, it can be helpful to do the conversion when the market has corrected down from its highs so that the realized gains are lower. It’s not timing the market — it’s timing the taxes to work in your best interest.
Not the same kind of harvest, but it’s pretty to look at.
5. Shifting income (or deductions) to the right year
Sometimes the smartest move is not what you do, but when you do it. A small shift can change your bracket or unlock tax credits you’d otherwise miss.
Some strategies here can include pushing a bonus or invoice into January, prepaying deductible expenses in December, timing retirement distributions intentionally (like with inherited IRA accounts that have to be emptied within 10 years), or even bunching charitable donations.
Example:
Last year I worked with a client who liked to give $2,500 annually to their favorite charity. Because they didn’t have enough other deductions to itemize, they were taking the standard deduction (but were very close to it). By “bunching” two years of gifts into that tax year with a gift of $5,000, they were able to itemize and take a deduction for the extra $2,500.
“A person doesn’t know how much he has to be thankful for until he has to pay taxes on it.”
(Side note: one great way to show your gratitude for good fortune is to give to others (and then no one has to pay the tax!)
6. Taking advantage of entity structure (for business owners)
For business owners, contract workers, and consultants, the way you’re legally structured determines how you file your taxes and what you get to keep.
Electing S-Corp status at the right time
Separating personal and business expenses cleanly
Maximizing the 20% QBI deduction
Entity choice doesn’t just affect taxes — it affects retirement savings, payroll, liability, and future planning.
Example:
While you can make retirement account contributions all the way up to the tax filing deadline in April, you must elect to be taxed as an S-Corp by March 15th of that same tax year, and you must have received a reasonable proportion of your company’s net income as W-2 wages (through payroll).
“I love your highlights!”, “Thanks, I love the way you fully depreciate your capital equipment.”
Why all this hard work to save on taxes?
Potentially saving thousands on taxes and not overpaying more than your fair share isn’t the goal. The goal is to use those thousands in tax savings towards the stuff that really matters to you (like that family vacation full of kodak memories or an extra contribution to your kid’s college fund).
Keeping more of what you earn allows you to support the things you truly care about.
Want to Keep More of What You Earn?
You don’t need to become a tax expert. You just need someone in your corner who understands how taxes connect to everything else — your income, your family, your spending, your business, your retirement, your goals.
If you’re ready to make taxes part of your strategy instead of a seasonal chore, let’s talk. Your future self (and maybe your CPA) will thank you. Click here to book a call with Stacy.
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Stacy Dervin, CFA, CFP® provides fee-only financial planning and investment management services in Eugene, Oregon. Tailored Financial Planning (TFP) serves clients as a fiduciary and never earns a commission of any kind. As a financial advisor, Stacy is on a mission to help Gen X and Gen Y be truly proactive about their financial futures.
Please note, none of this content should be considered tax advice. This post is for educational purposes only. Always consult with your financial advisor and/or CPA when it comes to making decisions that have consequential tax impacts.
Full Disclosure: Nothing on this website should ever be considered to be advice, research or an invitation to buy or sell any securities. Please see the Disclaimer page for a full disclaimer.
