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To maximize their wealth, Americans should look beyond smart investments and engage in smart tax planning.
From taxable income reduction strategies to tax-efficient portfolio rebalancing, there are numerous ways for investors to build and protect their capital. However, many people do not take advantage of the options available to them.
“When people look for ways to save money — yes, you can buy in bulk, yes, you can limit eating out — I think people sometimes forget that you can be strategic about your tax planning to save money,” said certified financial planner Kamila Elliott, co-founder and CEO of Collective Wealth Partners. “Not thinking about tax planning can be a significant oversight for many families.”
In fact, a recent Nationwide Retirement Institute survey found that most Americans are unprepared when it comes to taxes.
While 80% expect tax increases in the future, only 31% of this cohort are taking steps to adjust their financial plans accordingly, the survey found. Additionally, 17% of investors said that not knowing the best tax strategies for their portfolio was one of their biggest retirement planning concerns.
This preparation can be as simple as taking advantage of company benefits or making targeted investment decisions based on your income and tax bracket.
Maximize your benefits
Employers may offer various options for reducing your taxable income, including 401(k)s and health savings accounts.
Employees can deduct up to $24,500 before taxes from their salary in 2026 and invest it in a 401(k) or 403(b). Those age 50 and older can invest an additional $8,000 in catch-up contributions, while those ages 60 to 63 can make a “super catch-up contribution” of up to $11,250. The investments are tax-deferred until the money is withdrawn in retirement.
However, anyone who earned more than $150,000 from their current employer in 2025 must make their catch-up contributions into an after-tax Roth account. This means they don’t pay any taxes when they withdraw.
If you can maximize these pretax deductions, you can limit some of your income to the increase in the progressive table, and that’s real savings.
CFP Kamila Elliott
CEO of Collective Wealth Partners
Contributions to health savings accounts are also made before taxes. HSAs are a way for people with high-deductible health plans to save money and pay for qualified medical expenses.
They can also be a great retirement investment tool, said accountant AJ Campo, president of Campo Financial Group.
“It allows you to set money aside, get a pre-tax benefit for it, benefit from the appreciation that comes from the investment, and then use it to reimburse yourself for medical expenses later in life, or simply use it as a regular retirement distribution as if it were a traditional IRA.” [individual retirement account]” he said.
Those who may not qualify for an HSA may consider a healthcare flexible spending account that is used for qualified items that must be used each year. There are also dependent care FSAs that can cover day care or storage costs. Healthcare FSAs have a maximum contribution limit of $3,400 for 2026, while dependent care FSAs have a maximum contribution limit of $7,500 per household.
“If you can maximize those pre-tax deductions, you can limit some of your income to the increase in the progressive table, and those are real savings,” said Elliott, a member of the CNBC Financial Advisor Council.
It matters where your investments are
Another way to reduce your tax burden and increase your wealth is to strategically place investments in the appropriate accounts.
For example, investments that produce income taxed at normal rates go into retirement accounts like IRAs, said CFP Cathy Curtis, founder and CEO of Curtis Financial Planning. Regular interest rates are almost always higher than capital gains rates.
“I don’t know how many people understand the difference between the capital gains rate and the ordinary tax rate, but it can make a significant difference,” she said.
More tax-efficient investments such as exchange-traded funds and municipal bonds should be placed in a taxable account, said Curtis, also a member of the CNBC Financial Advisor Council.
A Roth IRA, funded with money that has already been taxed, is a great place to invest your highest-growth assets, she noted.
“You could grow this thing like crazy your whole life and not pay any taxes,” she said.
Take advantage of sales
Tax-loss harvesting is another way to reduce your tax burden by selling loss-making investments to offset any capital gains. You can deduct up to $3,000 from regular income once losses exceed gains.
While it’s a popular year-end strategy, investors should consider it year-round — especially during periods of volatility like now, Curtis said.
“Right now I’m looking for short-term loss opportunities that I can use to offset gains elsewhere,” she said. “I don’t think you should overdo it, but it’s a good strategy, especially for people who have owned things with large capital gains that represent an outsized position in their portfolio. I’ll see if I can sell something at a loss and take some profit on that investment.”
Timing of a Roth Conversion
Investors concerned about future tax rates or required minimum distributions are increasingly turning to Roth conversions, which essentially involve transferring funds from an IRA to a Roth IRA. You pay income tax on the converted amount, but you have no tax liability once you start making withdrawals.
However, investors should be cautious about the timing of conversions, Curtis said.
“I strategically look at years when my clients may have lower income, when they can convert to a Roth and that doesn’t put them in too high a marginal tax bracket,” she said.
“Generally, this is after they retire,” she added. “Also, unfortunately, some people lose their job and may have a reduced income for a year, or they decide to take a sabbatical and will have a reduced income for a year. Then I will do a Roth conversion.”
A mega backdoor Roth is also an option for high earners, said Campo. These are aimed at investors who have already maxed out their 401(k)s. Some are able to make after-tax 401(k) contributions and roll the money into a Roth. The maximum total contribution limit for 401(k)s in 2026 is $72,000.
“Don’t let tax evasion wag the dog. Most people are just focused on the now, and I want to save taxes now – and that’s very short-sighted,” Camp said. “What do I want to pay in five, 10, 15, 20 years?
Donate your investments
Donor-advised funds allow investors to make tax-deductible donations that are funded by cash or appreciation in assets.
Curtis prefers to use highly appreciated assets or mutual funds because they provide capital gains at the end of the year as part of donor-advised funds. Donations can be made over time.
For example, she always recommends them to customers whose company shares have increased significantly in value.
“The fact that you could give away highly appreciated stock and avoid a capital gain forever is a huge tax advantage,” she said.
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