• Throughout the year, assess tax-loss harvesting and plan charitable giving.
• During open enrollment, review the amount of withholding tax from your paycheck and consider opening a health savings account.
• At the end of the year, supercharge deductions by bunching, and donate appreciated assets.
• At tax time, compare your deduction options, maximize contributions to tax-advantaged accounts, and consider tax credits.

If you’re someone who doesn’t give much thought to how to pay less in taxes until April rolls around, you could be missing out on savings throughout the year.

Emily Irwin, Head of Wells Fargo’s Advice Center, offers these planning tips to help avoid overpaying your taxes so you can keep more money in your pocket each paycheck. “These strategies may help you reduce your tax bill while potentially maximizing your ability to give to others,” Irwin said. “It’s important to know what’s available to you and what fits your profile, so you’re not paying more than you should.”

As always, consult your tax advisor for tax planning and charitable giving considerations before you make any major financial transaction. For more information, visit the Wells Fargo Advisors Investing Tax Center and the Wells Fargo Tax Center.

Here are some strategies for paying less taxes:

1. Assess tax-loss harvesting

If your investments grew this year and you recognized gains, you may be able to lower your tax bill by implementing a tax-loss harvesting strategy. Tax-loss harvesting requires you to sell securities (for example, stocks and bonds) at a value less than their cost basis to create a loss, and these losses can then be used to offset recognized capital gains. Using this strategy, taxpayers may also be able to deduct up to $3,000 of any remaining losses to offset ordinary income each year and carry additional losses into future years.

With the potential for volatility in the market, harvesting capital losses should not be limited to the end of the year. Instead, consider reviewing with your advisor throughout the year, which may help you take advantage of market swings, avoid wash sale situations (the purchase of a “substantially identical” security within 30 days), understand the impact on dividend distributions and transaction fees, and make sure it works with your overall strategy.

Be sure to work closely with your tax advisor as well regarding how tax-loss harvesting could impact your tax situation.

2. Plan charitable giving

If you expect to realize capital gains in 2024 due to investment transactions or a sale of other assets, such as a business or real estate, consider implementing a charitable giving strategy to help reduce your tax bill. If you are certain that you want to benefit charity yet are uncertain which charitable organizations you wish to benefit, a donor-advised fund is a flexible option. With a donor-advised fund, you get the benefit of the immediate tax deduction, but grants from the fund do not need to be made this year. It is important to review your charitable giving plan to ensure that you receive any available charitable deductions in the desired tax year. Your tax and other financial advisors can outline strategies to consider.

Read more about donor-advised funds.

3. Review the amount of withholding tax from your paycheck

If you are owed a tax refund, it means that you paid more taxes during the year than you owed. Since you will not receive any interest on this money from Uncle Sam when it comes back to you, consider reviewing your W-4 to adjust the amount of withholding tax from each paycheck, which will have the effect of increasing your paychecks throughout the year.

On the flip side, if you owe taxes at the end of the year, it simply means that you did not have enough withheld from your earnings over the course of the year. This can happen if your employer does not withhold enough from your paychecks based on the information you provided on your W-4, or if you did not properly make quarterly estimated tax payments to the IRS.

While you can change your W-4 any time, a good rule of thumb is to review your withholdings at your employer’s open enrollment, which is usually in the fall. Be sure to update your W-4 if there is a change in your tax filing status, such as from single to married, or adding a dependent.

4. Open a health savings account

A health savings account (HSA) is a type of tax-advantaged account for individuals who are eligible for high-deductible medical plans. Contributions to HSAs are fully deductible from taxable income, grow tax-deferred within the account, and are not taxable so long as the money is used for qualified healthcare expenses. For 2024, HSA contribution limits are $4,150 for individuals and $8,300 for families. Individuals aged 55 and older can make a $1,000 annual catch-up contribution. There are a lot of upsides to this, so if you can afford it and you are eligible, consider maximizing it.

5. Supercharge deductions by bunching

Bunching is a strategy in which you alternate between taking the standard deduction in one year and itemizing your deductions in the next year. By making certain donations or payments, such as charitable or medical, in a particular year in order to exceed the standard deduction threshold, you can increase the likelihood of being able to itemize deductions and receive a tax benefit for these payments.

For example, if you make donations to a particular charity every year, you can make your normal contributions during the year but then prepay the entire subsequent year’s contribution in a lump sum in December of the current year. So essentially, you’re paying two years’ worth of deductions in a single tax year and have no charitable deductions in the next year.

6. Donate appreciated assets

In certain circumstances, gifting an asset that has appreciated in value may be advantageous because you may be able to eliminate the capital gains tax that otherwise would have been owed if the asset had been sold and the net sale proceeds donated to the charity. Ultimately, this means that you save on taxes and the charity receives more. Since December 31 is the deadline for completion of gifts, it is advisable to start the process earlier in the year.

7. Maximize contributions to tax-advantaged retirement accounts

Traditional IRAs, 401(k)s, 403(b)s, and 457(b)s accounts allow for a dollar-for-dollar reduction of taxable income for contributions made. Once contributions are made to these types of accounts, the asset can grow tax-deferred over time. Contributions can be made any time between January 1, 2024, and April 15, 2025, for your 2024 taxes. When distributions are made at retirement, income is payable on the distribution amount.

By contrast, Roth IRA and Roth 401(k) contributions don’t provide taxable income reduction up front but do allow for tax-free growth and tax-free qualified distributions. The contribution limits in 2024 are $7,000 for IRAs and $23,000 for 401(k)s. Individuals aged 50 and older can make annual catch-up contributions of $1,000 to an IRA and $7,500 to 401(k), 403(b), and 457(b) plans.

Read more about IRAs.

8. Compare standard deduction to itemized deductions

Deductions can reduce the amount of income that is subject to income tax. Some expenses paid during the year, like mortgage interest, can be deducted as itemized deductions. Charitable contributions and medical expenses can also be included as itemized deductions. Due to tax law changes in recent years, it is generally advantageous for most taxpayers to take the standard deduction. The standard deduction amount for 2024 is $14,600 for single taxpayers and $29,200 for taxpayers who are married filing jointly.

Comparing total itemized deductions available to the applicable standard deduction is a good way to ensure that you are minimizing the income tax that you’re responsible for.

9. Consider tax credits

Credits can be even more valuable than deductions because they reduce the amount of taxes due dollar for dollar. There are a variety of different credits that may be available depending on your situation. Reflect upon any major life events that occurred in 2024, such as getting married, expanding your family through birth or adoption, funding education or retirement, paying for child or dependent, incurring significant medical costs, or even home improvements or a new car – these changes may come with a tax benefit.

The following is a non-exhaustive list of credits that may be available depending on your personal and financial circumstances. Be sure to confirm with your tax advisor if you can take advantage of any credit to reduce your tax obligation. See more in the Wells Fargo Advisors Tax Planning Tables (PDF).

• Earned Income Tax Credit — For eligible families below certain income limits, which for 2024 ranges from $632 to $7,830.
• Child Tax Credit — The maximum credit for 2024 is $2,000 per child up to age 16.
• Child and Dependent Care Credit — For up to $3,000 of qualifying expenses for one qualifying child or dependent and up to $6,000 of qualifying expenses for two or more.
• Retirement Saver’s Credit — Taxpayers may be eligible for up to $1,000 ($2,000 for joint filers) in a government “matching” tax credit, which helps earners below certain income limits save more in a 401(k), Achieving a Better Life Experience (ABLE) account, or IRA.
• American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC) — Designed to help with the cost of higher education, the AOTC is up to $2,500 per eligible student; the LLC is up to $2,000 per tax return. Both credits can be claimed on the same return, but not for the same student or the same qualified expenses.
• Premium Tax Credit — If you purchased health insurance through one of the exchanges created by the Affordable Care Act, you may qualify for this tax credit to lower health insurance costs.
• Residential Clean Energy Credit — If you are a homeowner who invested in energy efficient upgrades to your home, you may qualify for a credit equal to a percentage of the upgrade’s cost.
• Electric Vehicle Credit — If you bought a new, qualified plug-in vehicle (EV), you may be eligible for up to $7,500 depending on when your car was purchased.

Capital gains are the profits realized from the sale of capital assets, such as stocks, bonds, and property.

Donor-advised funds allow you to make a tax-deductible donation today and then recommend gifts (known as grants) to charities from the fund over time, so the account can grow tax-free.

Itemized deductions are designated expenses that you can subtract from your taxable income and can be claimed in lieu of the standard deduction.

Securities broadly describes a wide array of investments, including stocks, bonds, limited partnership interests, oil and gas interests, and investment contracts.

Standard deduction is a flat amount based on your filing status that reduces the amount of income on which you’re taxed.

Tax credits are dollar-for-dollar amounts you claim on your tax return to reduce the income tax you owe. You can use them to reduce your tax bill and potentially increase your refund.

Tax-advantaged accounts offer ways to pay less in taxes and save more. They include 401(k)s, IRAs, Roth IRAs, 529s, and HSAs and FSAs.

Tax-loss harvesting is when you sell stocks and bonds at a value less than their cost basis to create a loss, which can then be used to offset capital gains.

Withholding tax is the amount of income tax your employer withholds from your paycheck.

• 2024 Wells Fargo Wealth & Investment Management Tax Planning Guide
• How to save on taxes
• No, the IRS isn’t texting you, and other things to know about tax fraud and scams