6 Personal Tax Planning Strategies to Employ Now to Save on Taxes

As the tax year progresses, proactive individuals and families understand the importance of taking charge of their financial future through effective tax planning. With careful strategy, you can significantly reduce your income tax liability—not just at year-end, but throughout the year. Tax planning isn’t only for the wealthy or self-employed; it’s a powerful financial tool for anyone seeking to retain more of their hard-earned income.

Below are six essential personal tax planning strategies you can implement now to reduce your income tax burden and improve your overall financial outlook.

  1. Maximize Retirement Contributions

One of the most effective ways to reduce your taxable income is to contribute to tax-advantaged retirement accounts. Traditional 401(k)s and IRAs allow you to make pre-tax contributions, which reduce your current taxable income while simultaneously building your retirement nest egg.

  • 401(k): For 2025, the contribution limit is $23,000 (or $30,500 if you’re age 50 or older).

  • Traditional IRA: The contribution limit is $7,000 (or $8,000 for those age 50 and above).

These contributions may be fully or partially deductible depending on your income and whether you or your spouse are covered by a workplace retirement plan.

For those who are self-employed, consider opening and funding a SEP IRA or Solo 401(k), which offer even higher contribution limits.

Action Step: Increase your monthly retirement contributions now to spread the impact over the year and ensure you reach the maximum limit before December 31.

  1. Leverage Health Savings Accounts (HSAs)

Health Savings Accounts (HSAs) are another powerful tool for tax savings, but they’re often underutilized. If you’re enrolled in a high-deductible health plan (HDHP), you can contribute pre-tax dollars to an HSA and use the funds tax-free for qualified medical expenses.

  • 2025 Contribution Limits: $4,150 for individuals, $8,300 for families, with an additional $1,000 catch-up contribution if you’re over 55.

HSAs provide a triple tax benefit:

  1. Contributions are tax-deductible.

  2. Earnings grow tax-free.

  3. Withdrawals for qualified medical expenses are tax-free.

Unlike Flexible Spending Accounts (FSAs), HSA funds roll over indefinitely, and after age 65, you can use the funds for non-medical expenses without penalty (though ordinary income tax applies).

Action Step: If eligible, open and fund an HSA early in the year. Even if you use the funds later, contributions reduce your taxable income today.

  1. Harvest Investment Losses

Tax-loss harvesting is a strategy where you sell investments at a loss to offset capital gains and reduce taxable income. This can be especially useful in a volatile market or as you rebalance your portfolio.

  • Capital Loss Deduction: You can offset all capital gains and deduct up to $3,000 in net capital losses from ordinary income annually.

  • Wash Sale Rule: You must wait 30 days before repurchasing the same or a “substantially identical” security to claim the loss.

Losses beyond the $3,000 cap can be carried forward to future tax years, offering extended tax reduction benefits.

Action Step: Review your investment portfolio quarterly and work with a financial advisor or tax professional to strategically harvest losses without compromising your investment goals.

  1. Bundle Deductions with Itemizing in Mind

The 2017 Tax Cuts and Jobs Act significantly increased the standard deduction, which now stands at $14,600 for single filers and $29,200 for married couples filing jointly in 2025. As a result, many taxpayers no longer itemize.

However, if your itemized deductions come close to the standard deduction, you can “bundle” deductible expenses into a single year to maximize your tax benefit. For example:

  • Make two years’ worth of charitable donations in one year.

  • Pay property taxes early or accelerate medical expenses when feasible.

This strategy allows you to itemize one year and take the standard deduction the next, effectively increasing your total deductions over time.

Action Step: Forecast your itemized deductions for the next two years and plan to group expenses strategically.

  1. Adjust Withholding or Estimated Tax Payments

Getting a large refund at tax time may feel rewarding, but it’s essentially an interest-free loan to the government. On the flip side, underpayment can result in penalties. Striking the right balance with your withholding and estimated payments is a smart way to optimize cash flow and avoid surprises.

Use the IRS Withholding Estimator or consult with a tax professional to determine if you need to:

  • Adjust your W-4 with your employer.

  • Make quarterly estimated tax payments, particularly if you have self-employment income, investment income, or side gigs.

Action Step: Review your tax liability from the previous year and check whether any major life changes (marriage, children, home purchase, etc.) have affected your current year’s tax situation.

Use this link to my video on how to use the IRS tax withholding calculator. 

  1. Take Advantage of Tax Credits

Unlike deductions, which reduce your taxable income, tax credits directly reduce your tax bill dollar for dollar. Many taxpayers miss out on valuable credits simply because they’re unaware of them or don’t take the time to determine eligibility.

Key personal tax credits include:

  • Child Tax Credit

  • Earned Income Tax Credit (EITC)

  • American Opportunity Credit (for education expenses)

  • Lifetime Learning Credit

  • Saver’s Credit (for retirement contributions)

Tax credits phase out at higher income levels, so knowing where you fall within those ranges can help you plan your income accordingly—perhaps by deferring income or increasing deductions to stay eligible.

Action Step: Identify which credits you might qualify for and ensure your income doesn’t exceed phase-out limits. Use this insight to adjust investment income, timing of bonuses, or retirement contributions.

Final Thoughts

Effective tax planning is not a one-time event; it’s an ongoing process that requires timely decisions, careful documentation, and strategic foresight. The earlier in the year you implement these strategies, the more you stand to gain—not just in reduced taxes, but also in long-term financial stability and peace of mind.

As always, consult with a certified tax professional or financial advisor to tailor these strategies to your unique financial situation and ensure compliance with all IRS regulations.

Start now. Don’t wait until the end of the year to think about your taxes—your future self will thank you.