Tax Planning Opportunities You Might Not Be Aware Of
To save on taxes over all your years, not just right now, try these four different strategies.

Tax planning is not just an opportunity to reduce your tax bill; it is also an opportunity to build up your financial assets with creative strategies. Smart investment choices now can reduce your taxable income pre- and post-retirement, as well as set funds aside for when you'll need them in the future.
Whether you're focusing primarily on your taxes or you're structuring your investment portfolio, by utilizing these often-overlooked tax-planning strategies and thinking outside the box, you can set both yourself and your family up for a prosperous financial future.
The Basics of a Roth Conversion
Roth conversions allow traditional IRA holders to transfer a portion of their IRA funds to their Roth IRA. A traditional IRA is beneficial because the contributions are tax-free; that is, contributors don't have to pay taxes when they make the contribution, and the funds grow tax-free until they are withdrawn, at which point they're taxed as ordinary income. Roth IRAs, on the other hand, have post-tax contributions but allow the funds to grow and be withdrawn tax-free.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
As a general rule, most financial experts will recommend you invest in a traditional IRA when your tax bracket is currently higher than you expect it to be in retirement, and you should invest in a Roth IRA when your current tax bracket is low so you pay taxes at the most advantageous time.
If you have money in a traditional IRA, the IRS allows you to convert some or all of that money into a Roth. You pay taxes (but no penalties) on the income you “withdraw” and immediately recontribute it into a Roth IRA. There are several advantages to this, including:
- You may be temporarily in a lower tax bracket now than when you made the contributions to your traditional IRA. So, you can effectively convert it to a Roth at a discount.
- You can shift more funds into a more versatile account. With a Roth IRA conversion, you can withdraw your principal (but not earnings) at any time once they’ve been vested for five years, and you don't have to take required minimum distributions in retirement.
- You might not otherwise have access to a Roth IRA. If you make more than $140,000 ($208,000 for households), then you're not eligible to make Roth IRA contributions. But a conversion gives you access to this account type and its benefits.
However, one disadvantage of an IRA conversion is that it can increase your Medicare insurance premiums later. For example, we had a client who could gain a $2 million lifetime boost to his assets if he converted them from a traditional IRA to a Roth, but the switch would raise his Medicare premiums by $4,000 for the year around the time of the conversion. While you should be aware of these disadvantages, it's important to weigh them against the total benefits. When you have completed your Roth conversion and your income has gone down to a lower amount the following calendar year, you can file a Form SSA-44 with the IRS and your annual premiums will be lower.
Another route to building up your Roth IRA is overfunding your 401(k). If you make post-tax contributions to your 401(k), you can add those funds to a Roth IRA after retirement in order to access the more versatile account benefits.
Start a 529 Plan
A 529 plan is a tax-advantaged account for saving for future educational expenses. This can be for you, for a current dependent or any other identified recipient. Contributions to a 529 plan are tax-deferred, and residents who live in states with a state income tax realize more benefits than those who don't pay state taxes. Individual states sponsor different 529 plans, so shop around for the best fit for your needs, even outside of the state you live in. 529 plans are also extremely versatile; they can be used for college costs (as long as the user enrolls in 12 credits or more) and can increasingly be used for K-12 qualified expenses.
Prioritize Your HSA
If you have a high deductible health plan (HDHP), then you have access to an HSA. You can invest pre-tax dollars into this account and make tax-free withdrawals for qualified health care-related purchases. There are a lot of different benefits to maxing out your HSA (to the tune of $3,650 for individual accounts and $7,300 for family accounts in 2022):
- First, those contributions aren't taxed.
- Second, the interest you gain from the investment is tax-free.
- Third, when you withdraw funds for qualified purchases, that money isn't taxed either (whether you're drawing from the principal or the interest).
If you don't have qualifying medical expenses, that's OK — once you reach the distribution age of 65, you can withdraw the funds you contributed for any type of expenses tax-free (you’d have to pay taxes on any investment gains you spend on non-medical expenses, though). That can make an HSA more powerful than both a traditional IRA (the pre-tax account) and a Roth IRA (the post-tax account). Maxing out your HSA should definitely be on your tax planning to-do list.
Start Planning Your Tax Strategies Well Before Tax Season
The best tax strategies are long-term savings plans that let you minimize this year's taxable income and help you create robust investments for future use.
In fact, the personal finance community has reached a general consensus on how to prioritize your investments for minimum taxes and maximum retirement benefits. Follow these steps:
- Invest in your 401(k) to max out employer contributions.
- Max out your HSA.
- Max out your IRA.
- Fill up the rest of your 401(k) with whatever’s left.
Depending on the benefits available to you, you can also modify your “order of operations” to include Employee Stock Purchase Plans, starting a second source of income to invest in an SEP IRA, or other options.
Allocating your money to tax-advantaged accounts isn't a last-minute tactic. Talk to your payroll department — and your financial adviser or accountant — before the end of the current tax year so you can maximize your financial potential.
Disclaimer
Securities and investment advisory services offered through Royal Alliance Associates, Inc. (RAA) member FINRA/SIPC. RAA is separately owned and other entities and/or marketing names, products or services referenced here are independent of RAA.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
For more than 18 years, Adam Lampe has helped high net-worth-individuals, affluent families, foundations and institutions work toward their financial goals through holistic financial planning. As the CEO & Co-Founder of Mint Wealth Management, he leads all development efforts within the firm. Alongside his extensive work serving clients, Adam also teaches retirement planning courses through Lone Star College and Prairie View A&M University satellite campuses around Houston.
-
Retire in Costa Rica With These Three Tax Benefits
Retirement Taxes Costa Rica may be a good place for retirement if you like the low cost of living and savings for your heirs.
By Kate Schubel Published
-
Five Ways to Ease Caregiver Stress
Caregiver stress is real. Here are five techniques to protect your health and happiness while caring for a loved one.
By MP Dunleavey Published
-
Financial Strategies Borrowed From the Big Game's Playbook
Like the best football teams, you can win at financial planning by executing a strategy, making halftime adjustments and staying focused on the ultimate prize.
By Frank J. Legan Published
-
Three Ways to Plan Now for a Social Security Shortfall Later
The outlook for Social Security is gloomy, but you can save now to protect against benefit cuts later. If the cuts don't happen, you'll still be better off.
By Tyler Jones Published
-
Ten IRS Audit Red Flags for Self-Employed Individuals
IRS Audits Taxpayers who file Schedule C with their Form 1040 have a greater chance of an IRS audit
By Joy Taylor Published
-
Extra Cash? Should You Pay Off Debt or Invest?
Depending on your financial situation, you might benefit from paying off debt, investing or both. Here are some things to consider before deciding.
By Anthony Martin Published
-
The Future of 1031 Exchanges Under Trump Looks Bright
As a real estate investor himself, President Trump appears poised to preserve the tax-deferring power of this strategy. But you still must follow the rules.
By Edward E. Fernandez Published
-
Gambling vs Investing: How to Tell the Difference
It's easy to get caught up in the excitement of placing a bet on the Big Game, but beware of letting that emotion drive your investing decisions.
By James Martielli, CFA®, CAIA® Published
-
Empowering Widows: Five Goals for Financial Security in 2025
Tackling these strategies one at a time, whether it's updating estate planning or reassessing investments, can help put you on track for financial stability.
By Stacy Francis, CFP®, CDFA®, CES™ Published
-
Private Credit: Coming Soon to a Portfolio Near You
Private credit could be a good source of diversification for sophisticated investors, but beware of the risks.
By Blaine Townsend, CIMC®, CIMA® Published