Most Americans Overpay Taxes (What The Wealthy Are Doing Before 2026)

The average American has no idea how much they're actually paying the IRS. Most people think they're doing fine, but behind the scenes, they're giving away far more than they should. And after spending 30 years helping high-net-worth families keep more of what they've earned, I can tell you this: the biggest tax savings comes from strategies that most people never hear about. Today I'm going to walk you through the five tax tips that you can use this year before it's too late.

So tip number one, it's your HSA account. Now, you might already have one, but there's a little more to this tip versus just simply having it and funding it. You want to use your HSA like a wealth tool and not a medical wallet. What I mean by that is don't think about always spending what's in that HSA. Think about saving.

You get a tax-deductible contribution. You get tax-free growth, and those dollars at some point can be used in a tax-free manner to pay for your health care expenses. Chances are if you're younger, you've got less of a health risk anyway, and so your health costs are probably lower. Let that money accumulate. It becomes another tool that can help in a huge way towards funding your retirement.

Tip number two, business owners, you want to use S corp status, but only when you've earned it. When you make an S corp election, it can save real money. The key is make sure that you have enough profit to justify moving to that S election. You need about 60 to $80,000 at a minimum in terms of profit to make the S corp election a good move. Don't let anyone tell you that you've got to do it by March 15th. There are ways around that, and it's easy to get it done.

Tip number three, this is all about taking market losses, doing something really good with them, like turning them into tax assets. So, I've had a lot of clients through the years who say to me, "Phil, I don't want to sell these losers in my portfolio. Let's just wait on them to come back. I hate to sell at a loss." It's natural. It's normal to think, let's just wait on a stock to recover.

If you've got a loss of two or three or five or $10,000 in a few stocks that just didn't perform well, and you've got thousands of dollars of gains in other stocks that did perform well, harvest the losses by selling before year end. And you can use that to offset any of the gains, any of the recognized gains that you've taken throughout the year. Got to do it by 2025 year end, otherwise the door closes.

Tip number four, this is all about using charitable donations. A lot of people, they don't itemize on their tax return, but if you're charitably inclined and you're going to make donations every year anyway, why not do something called bunching? Why not look ahead one, two, three, four years, five years? Why not take all of those dollars that you were going to give away anyway, bunch them into this year, make one contribution, and hey, if you're not sure where you want that money to go, open a donor-advised fund, or a DAF for short. You remain in full control, and you get the tax deduction right now.

Same generosity, better math. Why? Because your tax bill is going down. If your bunching is enough, you can itemize. And that means lots of other things could land on your tax return that will help reduce that adjusted gross income.

Now, tip number five, you want to max the accounts that reduce your tax. Now, I was talking to a client recently and they said, "Phil, I don't really want to max my 401k anymore because my employer's reduced the match and it just doesn't really seem like a great deal." Well, if you're in the 37% tax bracket, I bet it's still a good deal. And if your employer is giving you anything, it's still free money.

I'm not talking about getting you to retirement someday. I'm simply talking about avoiding unnecessary costs that the IRS wants to put on you today. You might be able to contribute to an IRA, and could be that backdooring that to a Roth IRA makes good sense for you. After you've maxed your 401k, you might need to think about other vehicles that could allow you to do even larger amounts.

So, here's the part most people don't like hearing. None of these strategies are complicated. They're just time-sensitive. And once December 31st passes, every opportunity I mentioned either shrinks or it disappears. The IRS doesn't care what you meant to do. They only care what you actually did before the deadline.

So, if you're still relying on luck, habit, or last year's strategy, understand this. You're not being conservative. You're being expensive. The people who keep more of their money, they don't just earn more. They decide earlier.

Now, let's go through a quick checklist to be sure that you're ready to take advantage of these tax tips. So, for retirement contributions, ask yourself, have you maxed your employer plan? Have you used the full catch-up if you're eligible? Got to be over 50 for that. And did you choose your deferral based on marginal tax rate?

Number two, your HSA. Are you eligible, and is it fully funded? Remember, to be eligible, you've got to have a high-deductible health care plan. And are you open to letting it grow long term?

Number three, your investment losses. Ask yourself, have you reviewed your portfolio for losses? And are you using those losses to offset gains or other income?

Number four, it's your charitable giving. Have you considered bunching? Are you a giver? And if so, have you evaluated a donor-advised fund?

And number five, for you business owners, are you earning consistently about $60 to $80,000 of profit? If so, the S corp might be just right for you. And have you run the S corp numbers to be sure they work? And finally, be sure that your books are clean and that you understand your compensation.

If you enjoyed this episode, I hope you'll give us a thumbs up. Consider subscribing. If you know someone that can use this kind of information, please share it with them. We'd love for this to get out to more people so they can do the same things that you're about to do. Save tax.