Most of the legal tax saving strategies used successfully by individual taxpayers in the U.S. stem from just 12 tactics. These are frequently observed in tax practice and confirmed by the IRS1 as the most expensive to the government. All of these avoid federal income tax:
- Earnings of nonprofit business organizations
- Qualified employee benefits
- Deferred compensation
- Health benefits
- Home sale
- Tax shelters
- Donations to charities
- Home and real estate ownership
- Life insurance
- Capital gains
- Tax free investment or retirement income
This short list is meant only as a summary and not a prescription for effective use. Often these strategies are used in combination for greater benefits. I have published many articles and videos that expand on each possibility. Which ones will work best for you? It depends on your goals and circumstances. I am pleased to discuss this planning one-on-one.
1 My list does not precisely match IRS and third-party reports exactly because this article ignores tax breaks afforded primarily to businesses. Also, government reports include some tax expenditures that we do not commonly think about as tax savings strategies so thee are also ignored.