8 ways to potentially lower your taxes

When it comes to filing your federal income taxes, it can pay to review your situation and plan ahead.

An Ameriprise financial advisor can help you identify year-round tax-savings opportunities and work with your tax professional to help ensure you’re not paying more taxes than required.

To lower your tax bill, here are eight possibilities to consider with your financial advisor.

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1. Plan throughout the year for taxes

By planning throughout the year, you can determine your likely tax bracket and plan strategies to lower your taxable income.

• At the beginning of the year: It may seem early, but this proactive mindset will be worth it when it comes time to file. The sooner you start preparing for the tax season, the more flexibility you’ll have to pursue tax strategies that could potentially benefit you.
• At the end of the year: Revisiting and considering year-end tax strategies may help you identify any final opportunities to reduce your tax bill. For example, you may realize you’re able to contribute more pre-tax assets to your 401(k) at year’s end, helping to reduce your taxable income.

2. Contribute to your retirement accounts

Contributing to retirement can be beneficial for both your long-term financial health and your near-term tax bill.¹ Here are a few ways that contributions to your retirement accounts can help you achieve tax savings:

• Traditional 401(k): Because your contributions are withdrawn from your paycheck before you’ve paid taxes, your taxable income will be lower, potentially reducing the federal taxes you owe for the year. This can be especially important to consider if your income straddles tax brackets.
• Traditional IRA: Contributions may be tax deductible, depending on your income level and whether you have a retirement plan option at work.
• Roth IRA: Roth IRAs are funded with after-tax dollars, so contributions won’t lower your immediate tax bill. However, you will benefit from tax-free growth and ultimately tax-free distributions in retirement if certain conditions are met.

3. Contribute to your HSA

If you’re in a high-deductible health plan, you might qualify for a health savings account (HSA). If so, consider increasing your contributions. Your contributions are pretax, which reduces your taxable income today. The account can grow tax-deferred and distributions can be tax-free if certain conditions are met. These are the only accounts that have this triple-tax benefit. ²

4. If you’re older than 70.5 years, consider a QCD

If you are 70.5 years or older and would like to support a charity, consider making a qualified charitable distribution (QCD) directly from an IRA to a qualified charity. A QCD keeps IRA distributions from impacting your adjusted gross income (AGI) now and in the future. It works whether you take the standard deduction or itemize deductions, and it can count toward your required minimum distribution (RMD), if you have one.

5. If you’re itemizing, maximize your deductions

A tax deduction reduces your taxable income. Consider whether the standard deduction or itemized deductions may be most beneficial based your circumstances. If you’re planning to itemize (instead of taking the standard deduction), consider how you can take early steps to maximize the tax benefit by taking advantage of deductions that are only available to those who itemize.

Here are some top itemized deductions to consider:

• Qualified charitable gifts
• Unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income
• Mortgage interest deduction³

Advice Spotlight

Consider “bunching” your itemizable deductions within a single year for a bigger tax benefit. Consider timing certain deductible expenses — like medical procedures or charitable donations⁴ — to occur within a single tax year. This strategy, known as “bunching,” allows you to reap maximum impact from itemizing your deductible expenses in certain years, while in other years, you take the standard deduction.

6. Look for opportunities to leverage available tax credits

A tax credit reduces your tax liability, dollar-for-dollar. To ensure you’re not missing new credits from the government, review potential credits available to you on a yearly basis. For example, the One Big Beautiful Bill Act introduced changes to the tax credits that are available to Americans to claim when they file their taxes.

7. Consider tax-loss harvesting

If you experienced any investing losses, they can potentially become a tax-savings opportunity through a strategy called tax-loss harvesting. When executed properly, tax-loss harvesting allows you to manage and reduce your tax burden by selling investments at a loss to offset the taxes owed on capital gains from other investments. In summary, it’s one way to use the tax code to reduce the sting of an investment loss. However, this strategy can be complex to employ, so please reach out to an Ameriprise financial advisor for personalized guidance.

8. Consider tax-gains harvesting

Harvesting capital gains to achieve tax benefits is the opposite of tax-loss harvesting. It may be worth considering strategic opportunities to sell certain assets that have experienced gains, if you think you may be in a higher capital gains bracket in the future. If executed correctly, you could potentially pay taxes on the gains under more favorable tax brackets in years you have less capital gains and less ordinary income.

Like tax-loss harvesting, this is a complex strategy, so reach out to an Ameriprise financial advisor for guidance on whether this opportunity is appropriate for your unique situation.

We can help you identify tax-saving opportunities

An Ameriprise financial advisor can review your financial situation with your tax professional and discuss how you may be able to take advantage of these and other tax-saving opportunities.

When you’re ready to reach out to an Ameriprise financial advisor for a complimentary initial consultation, consider bringing these questions to your meeting.

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