It is very true that taxes are the largest arbiter of wealth. Much of my career is spent planning for taxes. The foundation of all financial planning is planning for taxes now and later, and evaluating what decisions now are worth doing for tax savings immediately or in the future.
During tax season, I prepare returns from a portion of my clients, so on a granular level, I am well versed in how your money administration impacts your taxes. And if you are successful in my line of work, it’s likely your clients are the ones paying most of the taxes. It’s just reality—so if you are one who has a nice amount of wealth and, or a healthy income, but it’s not upwards of tens of millions, you my friend, are going to be paying the taxes. The middle and upper-middle class simply don’t have the resources available to avoid taxes like the uber wealthy. If you’re making a lot of money but not private jet money—you are going to get hammered every year in taxes.
This brings me to what you must realize as a taxpayer: there is no magic bullet to solving your tax problems. There is no investment strategy, deduction, or plan that will reduce your taxes to some reasonable level. You name the strategy that you’ve heard from someone about how it’s going to save you a ton in taxes and I’m here to tell you—you will be deeply disappointed because someone has to pay the tax bill—and unfortunately, it’s your group.
Before I go through the three most common “tax-savings strategies” pitched out there, let me remind you what it is you’re supposed to be doing with your finances. You are supposed to be investing for the longterm in holdings using methods that are passive. Meaning, if you are spending hours each week on any investment of yours, you are doing it wrong. Investing is not a side-hustle; it’s a long-term, boring process of living on less than you make and putting the rest somewhere that will grow over decades. With this as your purpose, when you look at an investment strategy you need to focus on what the returns are and how patient you’re willing to be to receive them, NOT on how much it may save you in taxes in the immediate.
Here are some common “tax savings investment strategies” that simply put are not worth all the effort and allocation of your resources solely for the minimal tax savings you may or may not receive.
Tax-Loss Harvesting
Tax-loss harvesting is a tax strategy where you intentionally sell investments that have declined in value to offset capital gains from other profitable investments, thereby reducing your overall taxable income or capital gains tax bill for the year.
Nobody ever mentions the administrative nightmare, transactional costs, and stress this type of strategy requires. Remember, you are in the business to grow your investments through time and patience. Not to sell things based on short-term trends hoping to offset some gains; this behavior is a distraction from your intended purpose.
After you factor in your time to implement this strategy, you must consider how much in taxes it’s really likely to save you. More often than not, you’d be better off getting a side hustle and making more money rather than you would be day trading your investments in hopes of locking in some losses.
In all reality, tax-loss harvesting is something that should be implemented rarely on a very case-specific basis. Any tax savings is a secondary benefit of eliminating an investment you do not want to hold for the long-term, whether for diversification or other purposes. And any tax savings from this strategy is not going to be life changing or the magic bullet to reducing how much you will ultimately pay in taxes.
I include rentals, flipping, and most aspects related to holding a tangible piece of property. Yes, real estate does have a lot of tax benefits. However, acquiring the real property and the ongoing stress of managing the asset is a lot of work when all you’re really trying to do is get some depreciation and other “tax benefits”.
Real Estate
If you want to own real estate as a long-term wealth and income building strategy, great. If there are a few tax benefits that can help you do this more efficiently, then buying real estate makes sense. But there is no significant tax savings great enough to pursue this type of investment solely for that purpose. Tax “savings” can be secondary—but not the motivator.
Just as with tax-loss harvesting, taking advantage of some tax benefits of an investment strategy that you are implementing for a long-term purpose is fine, but don’t engage in the work of owning a piece of property because you think it’s going to save you copious amounts on taxes—the juice isn’t worth the squeeze.
Owning a Business
The truth is, owning a business does allow a lot of deductions from your income. If you are thoughtful about how you run your business, there is more room here than in a lot of other areas. That being said, you now have to operate a legitimate business. You cannot just “create” a business and suddenly have it solve your tax problems—and if you do, you will be who the IRs scrutinizes. If you are running businesses with massive losses year-over-year, you are a red flag to the system, and the stress of this catching up to you is not worth it.
Bottom line, there is no “easy” way to save on your taxes through an investment. You need to focus on building your wealth in ways that make sense from a long-term perspective and take advantage of whatever tax benefits are related to something you already know will benefit you. Do not embark on an investment thinking it will save you in taxes—it probably won’t. And nor should it, the point of investing is to make money, and any time you make money you are going to have to give a piece of the pie the your government.
What You Should Do
So what can you do? You can properly manage your tax planning and get in front of any taxes you will need to pay so every year it’s not a huge source of aggravation. And you can tax plan effectively for the future.
For the here and now, if you are constantly being shocked by your tax bill in April, you need an accountant or planner who can help you estimate taxes for the next year and plan for quarterly payments. Your goal should be to owe the government some minimal amount in April because you already managed your cashflow and payments to them throughout the year. Note, if you are regularly getting a refund, you need to stop that nonsense immediately. This means you are loaning the government money throughout the year in hopes they give it back to you. Ask yourself, if someone with the government’s balance sheet came to you for a loan would you think of them as worthy borrower?
For the future, I highly recommend saving most or all of your retirement money into Roth vehicles. This does mean you would pay the taxes now but in the future: all growth is tax free. If you work with me, you know I recommend dealing with taxes in the here and now, while you’re working, so that in retirement, they are minimized.
Yes, there are strategies to tax planning, but they are more about incremental things you can do (deductions, pre-tax savings, etc.) in the here and now, or large things you can do now to save in taxes in the future (Roth building). There is no magic investment or strategy that will make you money while saving you in taxes. If it existed, I would share it with you for a very expensive price and you’d never hear from me again, as I’d then I’d be a very wealthy recluse on my farm.
Begin viewing your taxes as the cost of living in this country and an expense. It’s something you can mitigate on the edges, but there is no major reduction coming your way due to some illusive investment strategy.
Rural Life Lately
Last month I wrote about the Sackets Harbor walking club and all the amazing things this group has brought to my life. I received a number of comments from clients and readers—all positive about how fortunate I am to have such a wonderful community and how rare and picturesque it all seems.
I thought it might be important to share a bit about some of the realities of building community I’ve experienced. While I do like to write mostly about the good things in life, there is always struggle and work to getting to the good. Here are some realities that living in this village has taught me when it comes to building real relationships your neighbors.
You Have To be the First To Make the Move
You cannot wait for other people to reach out to you, to suggest a coffee or lunch. You cannot sit at home wondering why your phone is not ringing and you have no community. You have to do the work—the stuff nobody wants to do, and it has to be in person. My friend in the village, Kelly, is my dearest friend now because (as I like to joke) four years ago I started stalking her at her shop. Literally. The first time I met her was organic, I was in her shop and got to chatting with her, and that day I left and said to myself (and Andrew) “she is going to be my friend.” And so, from that day onwards, anytime I was in town I would see if she was in her shop and I would come in and chat with her. Then one day I did the awkward “let’s get together” and the rest is history.
This is us on a girls’ trip last year. Kelly is just one example of me deciding that I don’t care if it’s awkward, I don’t care if I’m rejected, if you want to start meeting more people in your life you have to just do the work.
Building friendships and community groups is like dating. You have to get to a point where you make the move and see if the other person is receptive and if not avoid dwelling on it and move on.
Not Everyone Is Going To Like You
I am reminded of this painful (yet obvious) reality more than I’d care to admit. I think of myself as versatile, able to get along with most anyone and moderate myself in a way that can be inoffensive as needed. I also work very hard at being honest and trustworthy, so people know what they are going to get when they deal with me.
Even working at it, even trying hard, there are a few people in the village who just plain, don’t like me. There was not some epic argument or confrontation and I can’t think of one specific behavior that helps me understand what they dislike about me. Rather, it was just—they didn’t like me, for whatever reason.
I think not liking people is part of life—there are people I don’t like at all who I interact with socially and don’t make a big deal about it. I would never not attend a social event because they were present—and I’m always going to be as reasonable and polite as possible. I can’t expect that from others, but how you deal with people just not liking you—valid or not— is you must just push on.
Not Everyone Is Likable
Along the same lines, there will be people who are part of your community you dislike, sometimes immensely. Oftentimes these are the same people who happen to be everywhere and always attending things. And your job is the most inconvenient—invite them to anything and everything; if you are hosting something and they are part of the community, like them or not, you have to genuinely include them. (And of course they will be the first to RSVP.) You cannot do this while making sure everyone knows you don’t like them, or make them realize how you truly feel. You have to do your best to mask your feelings and include the because your community includes people you don’t like, agree with, or live like. They are your neighbors, and you don’t have to like them, but you do have to love them (or make best efforts).
Bottom line, if you want to build something of value—something that requires you to interact with people and learn about their good and bad qualities and love them anyway, you have to just keep going. You cannot let the bad experiences hold you back from a much more important goal—loving the place you are in and the people in it not through words and thoughts, but through deed.
The Magic Tax Strategy Does Not Exist by Jenny Logan, Originally posted on March 6, 2025 – Read on Substack