Proactive Tax Planning Tactics

Understanding Your Marginal Tax Brackets:

Not all of your income is taxed at the same rate. The U.S. tax system is progressive, meaning portions of your income are taxed in tiers, with higher rates applied only to the income above certain thresholds. Knowing your marginal tax bracket can help you make smart tax decisions such as when to harvest capital gains, contribute to retirement accounts, or accelerate deductions. These strategies can potentially lower your lifetime tax bill.

Want to see how tax planning can work for you? Talk to a fee-only fiduciary advisor at Endowment Wealth Management for a complimentary review of tax planning opportunities and learn how various strategies may affect your overall financial plan.

Lowering Your Taxable Income: 

One of the most effective ways to reduce your tax bill is by contributing to tax-deferred accounts. These contributions lower your adjusted gross income (AGI) in the year they’re made, which may reduce your current tax liability. Some examples include:

  • Traditional 401(k)
  • Deductible IRA
  • Health Savings Account (HSA)

These accounts are especially beneficial if you’re in a high marginal tax bracket today and expect to be in a lower bracket in the future (e.g., retirement).

Taking Advantage of Low Marginal Tax Brackets:

If you’re currently in a low tax bracket, you may want to pay taxes now in exchange for tax-free growth in the future. Some strategies include: 

  • Roth IRA & Roth 401(k) Contributions: You contribute after-tax dollars, and the money grows tax-free for life (as long as requirements are met.)
  • Roth Conversions: Converting pre-tax retirement assets (like a Traditional IRA) into a Roth IRA during lower-income years may be beneficial for some investors depending on their current and anticipated future tax situation.
  • Capital Gains Harvesting: Realize long-term capital gains in low-income years, potentially at 0% federal tax if your income is low enough.

These strategies are ideal for younger investors, those between jobs, early retirees, or anyone with temporary dips in income.

Tax-Loss Harvesting:

Tax-loss harvesting involves selling investments at a loss to offset capital gains and reduce your taxable income by up to $3,000 of ordinary income per year (if losses exceed gains). The proceeds are typically reinvested in similar, but not identical, investments to maintain your market exposure and avoid wash sale rules. The effectiveness of tax-loss harvesting depends on an individual’s tax situation and investment holdings.

Embark, our digital & automated investment platform, offers free automatic tax-loss harvesting for clients.

Maximizing Tax Credits: 

  • For Families: Child Tax Credit & Child and Dependent Care Credit
  • For Education: American Opportunity Tax Credit & Lifetime Learning Credit
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Related Solutions:
Income Tax and Withholding Review
Tax Review Checklist
Roth IRA Conversion Solution
2026 Federal Tax Changes
Paying Estimated Taxes

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Disclosures: Information contained herein is intended for informational, illustrative and/or educational use only and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purpose nor shall it be construed to be the provision of individualized investment, tax or legal advice. Endowment Wealth Management, Inc. (“EWM”) is not soliciting or recommending any action based on this material. This is neither an offer nor a solicitation to buy/or sell securities in any state or jurisdiction where EWM is not registered, or notice filed and does not qualify for an exemption from such registration and notice filing requirements. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that consider all of the particular facts and circumstances of the investor’s own situation. All investments involve risk and potential loss of capital and, unless otherwise stated, are not insured or guaranteed.

While the content herein has been obtained from sources that we consider reliable, we do not represent that the information is accurate, complete, or current and it may be relied upon as such. Reliance upon any information in this material is at the sole discretion of the reader. Content is subject to change without notice.

The examples and strategies discussed in this material are provided for educational and illustrative purposes only. They are intended to explain general tax-planning concepts and should not be construed as individualized tax, legal, accounting, investment, or financial planning advice. The suitability and tax consequences of any strategy depend on an individual’s unique circumstances, income, tax status, assets, and applicable laws. Before implementing any strategy, consult with your tax professional, attorney, financial advisor, or other qualified professionals regarding your specific situation.

Endowment Wealth Management, Inc. (“EWM”) is registered as an investment adviser with the SEC. Registration does not imply a certain level of skill or training. A copy of EWM’s disclosure documents, including Form ADV Part 3 (Client Relationship Summary), Form ADV Brochure Part 2, and Privacy Statement, are available upon request.