Avoiding taxes completely isn't legal or desirable; money has to come from somewhere to fund the social services and public works on which your community depends.

While you can't avoid taxes entirely, it's possible to lower your tax bill through strategic financial moves. You don't have to be a top earner, either. Average, 澳洲幸运5官方开奖结果体彩网:middle-class earners canও use six strategies to lower their incom🌜e taxes legally.

1. Consider Investing in Municipal Bonds

When you buy a municipal bond, you are loaning money to the issuer in exchange for repayment with interest. Municipal bonds, which are issued by states or localities to fund things like roads and schools, tend to pay lower interest rates than corporate bonds. But they come with a distinct tax advantage: if you hold the bond until it matures, you don't have to pay federal income tax on the interest you earn. In many cases, you also won't have to pay state or local taxes if you live where the bond was issued.

Historically, 澳洲幸运5官方开奖结果体彩网:municipal bonds have also had lower default rates than corporate bonds. From 1970 to 2022, the default rate for munis was 0.08%. By contrast, corporate bonds defaulted at a significantly higher rate of 6.9% in the same period.

2. Take Long-Term Capital Gains

Investing strategically can lower your tax bill because income from long-term capital gains is taxed at lower rates than ordinaryꩵ wages or job income.

Long-term capital gains apply to sales of assets that you've held for more than one year. This type of income is taxed at rates of 0%, 15%, or 20%, depending on your income bracket. By contrast, the tax rates for ordinary income go as high as 37%.

澳洲幸运5官方开奖结果体彩网:Short-term capital gains, which apply to the sale of assets that have been held for less than a year, are taxed at ordinary income rates. If you plan to sell stocks, bonds, real estate, or other assets that generate capital gains, consider choosing assets that you have held for a year or more to lower your tax bill.

3. Start a Business

Starting a side business can come with a variety of tax advantages. The IRS allows business owners to deduct many expenses that are necessary and regular in the course of operating their business. Possible deductions include:

• 澳洲幸运5官方开奖结果体彩网:Home office
• Portion of home utilities and internet
• Vehicle use for business
• Business cell phone
• Self-employed retirement plan contributions
• Business travel

If you are self-employed, you can even deduct health insurance premiums if you meet specific requirements. When combine🔜d, these deducꦛtions can significantly lower your taxable income.

4. Take Advantage of Retirement and Employee Benef⛎its

If your employer offers a retirement account such as a 401(k) or 403(b) plan, having contributions taken from your paycheck can reduce your taxable income by up to $23,500 in 2025. If you are age 50 or older, you can contribute an additional $7,500 for a total of $31,000. A 55-year-old who makes $100,000 per year and maxe𝐆s out their 401(k) contributions can reduce their taxable income to $69,000 and pay significantly less tax for the year.

If you don't have a retirement plan through your work, you can still contribute up to $7,000 per year to a 澳洲幸运5官方🌠开奖结果体彩网:traditional individual retirement account (IRA), which also reduces your taxable income. If you have both an employer-sponsored plan (or your spouse does) and a traditional IRA, you may be able to deduct all or some of your IRA contributions, depending on your total income.

Many employers also offer other benefits, known as "fringe benefits," that can reduce your total taxable income. These can include:

• Reimbursement for adoption expenses
• 澳洲幸运5官方开奖结果体彩网:Flexible spending account (FSA)
• 澳洲幸运5官方开奖结果体彩网:Dependent care FSA or dependent care assistance
• Educational assistance
• Tuition reduction
• Commuting cost reimbursement
• Group term life insurance

These benefits are either taken out of your paycheck or reimbursed to you by your employer after you pay them. Some of these benefits are excluded (or partially excluded) from being taxed and not reported on your W-2; others, like reimbursement for adoption expenses, are excluded from income tax but not other taxes and are still reported on your W-2.

5. Contribute to a Health Savings Account (HSA)

If you have a 澳洲幸运5官方开奖结果体彩网:high-deduct🙈ible health insuraꦚnce plan, you can choose to open a 澳洲幸运5官方开奖结果体彩网:health savings account (HSA) to go along with it. Like a 401(k), an HSA is funded with deductions from your paycheck. Contributions reduce your taxable income by an equal amount.

In 2025, the maximum deductible contribution to an HSA is $4,300 for individuals and $8,550 for families. A family with a $100,000 income who maxes ou♔t their HSA contributions for the year can reduce their taxable income to $91,450.

The funds in an HSA never expire. You can keep your HSA after you have a different health plan or leave your employer, including investing the money it in so it grows until you are in retirement. You don't have to pay tax on the earnings, and any withdrawals from the account aren't taxed if you use them to pay for 澳洲幸运5官方开奖结果体彩网:qualified medical expenses.

6. Claim All Your Deductions and Credits

澳洲幸🎃运5官方开奖结果体彩网:Claiming all the deductions and tax credits to which you're entitled can signif🎃icantly lo🌜wer your tax bill.

A deduction lowers your taxable income. Many deductions are only available if you itemize rather than 澳洲幸运5官方开奖结果体彩网:taking the standard deduction. However, some deductions can be claimed whether or not you itemize, including:

• Alimony payments
• Student loan interest
• Work-related education expenses for some government, military, self-employed, and disabled individuals
• Moving expenses for military service members
  
• Teacher expenses up to $300

Tax credits are an even better way to lower your taxes because the🉐y are a dollar-for-dollar reduction in the tax you owe. Common tax credits for low-to-average earners include:

• Child Tax Credit: $2,000 tax credit for each qualifying child, stepchild, sibling, or descendant claimed as a dependent on your tax return. To claim the full CTC, you cannot earn more than $200,000 if you're a single filer or $400,000 if you're married filing jointly.
• 澳洲幸𒁃运5官方开奖结果体彩网:Child and Dependent Care Tax Credit: A portion of expenses spent on care for an eligible child or other dependent while the legal caregiver works or searches for work. Care can be for young children as well as children and adults who are mentally or physically incapable of caring for themselves.
• 澳洲幸运5官方开奖结果体彩网:Earned Income Tax Credit (EITC): Tax credit aimed at working, low-income taxpayers based on income, marital status, and number of children. In 2025, the EITC is worth $8,046 with three or more qualifying children, $7,152 with two, $4,328 with one, and $649 with no children.
  
• 澳洲幸运5官方开奖结果体彩网:American Opportunity Tax Credit: Up to $2,500 per year for the first four years of higher education expenses for eligible students.
• 澳洲幸运5官方开奖结果体彩网:Lifetime Learning Credit: Worth $2,000 per return or a maximum of 20% of up to $10,000 of qualified educational expenses.
• 澳洲幸运5官方开奖结果体彩网:Savers Credit: Credit for savings set aside by moderate- and low-income taxpayers, worth up to half your contributions to a retirement plan, IRA, or 澳洲幸运5官方开奖结果体彩网:ABLE account.

The Bottom Line

You have to pay taxes, but you don't have to pay more than you legally owe. By maximizing your deductions, credits, and employee benefits, and being strategic with your investments, you can save hundreds or even thousands of dollars on your taxes.

If you aren't sure which strategies you qualify to use, talk to a tax professional. They can help you maximize your savings without ge🍎tting into trouble with the IRS.