Taxes May Be a Certainty, But the Amount You Pay Doesn't Have to Be

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We all want to be as efficient with our money as possible, and one way to accomplish that is to optimize the amount we pay in taxes.

Unfortunately, many of us aren't as good about that as we should be. Often, people make financial decisions throughout the year without thinking about the tax implications and whether a different approach might have been wiser.

Let's look at a few things that could help you in your quest to lower your tax bill so you can keep more dollars to spend on the things that matter to you.

Understand your tax brackets

The U.S. tax code is quite overwhelming, so it's difficult to understand all the nuances. But at a minimum, you should know where you lie in terms of the marginal tax rate.

There are seven marginal tax rates for 2025 that range from 10% to 37%, and as you move into higher income tax brackets, the percentage of your income over a certain amount is taxed at a higher rate. It's important to be aware of this when you're making financial decisions.

For example, perhaps you're considering buying an investment property. But if the rental income from that property puts you into a higher tax bracket, it might not be as good a deal as you originally thought.

Be aware of your marginal tax rate because you have greater control over your taxes if you understand where your starting point is.

See your tax professional two to three times a year

Many people visit their tax professionals once a year — usually after the tax year is over, which means they will simply be told how much they owe or how much their refunds will be.

After December 31, it's too late to do much about the bottom line, so this visit is essentially a "tell me the damage" visit.

A better approach is to see your tax professional two to three times a year.

The first visit should happen about midyear. Discuss any changes in your life that might have tax implications. Review what happened in the prior year so you can avoid repeating mistakes.

Make a second visit toward the end of the year to discuss how things are going. If it looks like you may get a refund, it could be a good time to do a Roth conversion because the refund could absorb some of the tax you would need to pay on the conversion.

If you're going to owe money to the IRS, you could consider depositing more into your retirement account or perhaps making a charitable donation, either of which could help reduce your tax bill.

Finally, the third visit to your tax professional would be after the tax year is over. This is typically the visit many people make during tax preparation season, where they learn what the damage is.

Take advantage of deductions

For most of the taxpaying population, itemizing deductions ended with the passage of the 2017 Tax Cuts and Jobs Act (TCJA).

The increase to the standard deduction in that legislation — made permanent through the 2025 One Big Beautiful Bill Act (OBBBA) — was so high that a typical taxpayer couldn't cobble together enough deductible expenses to total more than the standard.

That's the case for many retirees as well. For example, the standard deduction for the 2025 tax year is $15,750 for single taxpayers and $31,500 for married couples filing jointly. For 2026, the standard deduction is $16,100 for single taxpayers and $ 32,200 for married couples filing jointly.

But there are still strategies you can use to lower your tax bill through itemized deductions. One way is to give appreciated assets to charity. Maybe you have an IRA that will have required minimum distributions (RMDs) that will be taxed in the future. You could set up a qualified charitable distribution (QCD) that transfers funds to a charity, and those donations qualify as your RMD.

Understand capital gains

Understand the difference between long-term capital gains and short-term capital gains.

• Short-term gains are profits you made from assets you have held for a year or less
• Long-term gains are profits made from assets you have held for more than a year

The two types of gains are taxed at different rates, and generally, the tax rate on short-term gains will be higher than on long-term gains.

One way to help improve your tax situation with capital gains is through tax-loss harvesting. That's when you sell some investments at a loss to offset the gains you made with other investments.

Contribute to retirement accounts

Be sure to contribute to your retirement accounts, especially if your employer offers a match.

If you're self-employed, it's important to know that you can use a simplified employee pension IRA (SEP IRA) or a solo 401(k), which is a 401(k) plan specifically designed for business owners with no employees.

Another thing worth knowing is that if your spouse doesn't work, you can contribute to a retirement account for them.

If these retirement accounts are tax-deferred, your contributions will help lower your tax bill.

Be careful about giving assets to your children

Parents can be generous with gifts to their children, but that generosity may lead to unwelcome tax ramifications.

For example, let's say you own real estate that you want to pass on to your children. It might be better for them taxwise if you leave it as part of your estate when you die rather than transfer ownership now. Why? Because of something called "step-up in basis."

If you give them your property now and they sell it, they will owe capital gains tax on the difference between what you paid for the property — perhaps decades ago — and the price they sell it for now.

But if they inherit the property, that changes. Their new basis for capital gains becomes the value of the property at the time they inherit it, so if they sell it immediately, they won't owe anything.

Explore with your financial professional any potential tax consequences when making such substantial gifts to your children.

These are just a few of the tax situations that might arise. That's why those visits to a professional who can provide advice and direction are so important.

Yes, taxes may be a certainty. But the amount you owe doesn't have to be.

Ronnie Blair contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.