Looking for legal ways to reduce your tax bill before you’re caught off guard again next spring? In this classic Money for Life episode, hosts Eric and Kali break down five tax reduction strategies for high earners.

These 5 money moves are all designed to lower what you owe the IRS. By being proactive and strategic, you can lower your tax burden and avoid unpleasant surprise tax bills next year

We talk through:

• How to use a securities-backed line of credit against your brokerage or bank account to access cash without triggering capital gains from selling investments
• How to treat your HSA like a stealth IRA for triple tax-free growth
• The financial tradeoffs of relocating to a state with no income tax
• Why tax-loss harvesting is more strategic than the robo-advisor marketing suggests (and where the wash-sale rule trips people up)
• Why high income earners might want to consider using a backdoor Roth IRA conversion to get money into a Roth despite income limits… plus the pro-rata rule mistake that can quietly create a tax bill (and IRS penalties) down the road

This is a rerun of a fan-favorite episode, so as an important note for listeners: some of the figures mentioned are from when this originally aired in 2022. Account limits and specific numbers have been adjusted since then, and some numbers may be different for the 2026 tax year (and beyond).

Other than specific IRS limits, the guidelines here are still valid and the strategies are solid for reducing your tax burden with some proactive planning.

This is a great mid-year listen if you want to make adjustments before you file again next spring.

KEY TAKEAWAYS

A securities-backed line of credit against your brokerage or bank account lets you access cash without selling investments — avoiding capital gains taxes and keeping your money compounding in the market.

This kind of credit line works best as a “just in case” safety net, not as a way to actively leverage or amplify investment returns.

Not every custodian or retail platform offers lending against investment accounts as collateral — it’s more commonly available through advisory/institutional platforms than typical retail brokerages.

An HSA (Health Savings Account) can function like a “medical IRA”: contributions are tax-advantaged, the balance can be invested and grown tax-free, and qualified withdrawals are tax-free too — a triple tax benefit no other account offers.

HSAs aren’t right for everyone — they require a high-deductible health plan, which may not make sense if you have significant ongoing medical costs.

You don’t have to use HSA funds the same year you incur a medical expense — receipts can be saved indefinitely and reimbursed tax-free years later, and after age 65 the account behaves like a traditional IRA for non-medical withdrawals.

Relocating to a state with no income tax can meaningfully lower your tax burden if you’re already considering a move — but weigh it against potentially higher property and sales taxes in that state.

Tax-loss harvesting offsets capital gains by strategically selling losing positions — but it isn’t a guaranteed annual benefit for everyone, despite how robo-advisors often market it; it depends on having both gains and available losses to harvest.

The wash-sale rule limits how soon you can repurchase a security you sold at a loss — it’s one of several technical details that can void the benefit of tax-loss harvesting if missed.

A backdoor Roth IRA conversion lets high earners get money into a Roth despite income limits — but the strategy gets complicated (and partially taxable) if you already hold pre-tax money in a traditional or SEP IRA, due to the IRS pro-rata rule.

FAQs

Q: What is a securities-backed line of credit, and how does it help reduce taxes?

A: It’s a line of credit secured by the assets in your brokerage or bank account — similar to how a HELOC uses home equity as collateral. Because you’re borrowing against the account instead of selling out of it, you avoid triggering capital gains taxes and keep your investments working in the market.

Q: Can anyone open a line of credit against their investment account?

A: Not universally. This type of lending is more commonly offered through institutional or advisory platforms than standard retail brokerage accounts, so availability depends on your custodian.

Q: How can an HSA be used as a tax-free investment account instead of just a medical spending account?

A: Rather than spending HSA contributions on medical bills as they come in, you can pay current medical costs out of cash flow, invest the HSA balance, and let it grow tax-free for the long term — similar to how you’d treat an IRA.

Q: Is an HSA a good fit for everyone?

A: No. HSAs require a high-deductible health plan, which usually only makes financial sense for people with low, predictable medical costs. If you regularly incur high medical expenses, a lower-deductible plan may be the better choice even though it forfeits HSA access.

Q: Do I have to spend HSA funds in the same year I incur the medical expense?

A: No. You can pay for qualified medical expenses out-of-pocket, save the receipts indefinitely, and reimburse yourself tax-free from your HSA years later — as long as you can document the expense.

Q: Does moving to a state with no income tax actually save high earners money?

A: It can be significant, especially at higher income levels — but it should be weighed against other costs in that state, like property taxes and sales taxes, which are sometimes higher in no-income-tax states.

Q: What is tax-loss harvesting, and does it work for everyone?

A: Tax-loss harvesting means selling investments at a loss to offset capital gains elsewhere in your portfolio, reducing or eliminating the taxes owed on those gains. It’s not automatic or universal — it only works if you actually have losses available to harvest, so its value varies year to year and investor to investor, despite how some automated investing platforms market it.

Q: What is the wash-sale rule, and why does it matter for tax-loss harvesting?

A: It restricts repurchasing a security (or a substantially similar one) too soon after selling it at a loss, which would otherwise disqualify the tax benefit. It’s one of several technical rules that can void a tax-loss harvesting strategy if not followed carefully.

Q: What is a backdoor Roth IRA conversion?

A: It’s a strategy for high earners who exceed the income limits to contribute directly to a Roth IRA. You make a non-deductible contribution to a traditional IRA, then convert it to a Roth IRA — since the contribution wasn’t tax-deductible, the conversion itself is generally tax-free.

Q: What can go wrong with a backdoor Roth conversion?

A: If you already hold pre-tax money in a traditional or SEP IRA, the IRS’s pro-rata rule requires you to pay taxes on a proportional share of the conversion — making the strategy partially taxable rather than tax-free. People who overlook this can end up owing back taxes and penalties.

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