If you’re a W2 employee, you may feel the tax system isn’t designed with your best interests in mind. Current laws heavily favor business owners and entrepreneurs through deductions and incentives, often leaving wage earners with fewer options. But with the right strategies, you can still reduce your tax burden, build wealth, and take greater control of your financial future.
Learn more about:
- How to maximize deductions and tax-advantaged accounts
- How to strategically leverage tax credits
- How to optimize filing status, state taxes, and withholding
- Tax-efficient investment strategies
Let’s dive into how you can make the tax code work for you.
Maximize Deductions and Tax-Advantaged Accounts
Key Tools:
Traditional 401(k), IRA, and HSA Contributions Lower taxable income and grow assets tax-deferred or tax-free.
Medical Deductions For the 2025 tax year, you can deduct qualified medical expenses which exceed 7.5% of your adjusted gross income (AGI) if you itemize deductions.
Student Loan Interest Deductions For the 2025 tax year, you may deduct the lesser of $2,500 or the amount of interest you actually paid during the year.
Considerations: While deferring taxes provides current savings, withdrawals from retirement accounts will be taxed later—potentially at higher future rates. Similarly, early non-medical use of HSA funds can trigger penalties.
Leverage Key Tax Credits
Why Credits Matter: Credits reduce your tax bill dollar-for-dollar—often more impactful than deductions.
Key Credits to Know:
- Earned Income Tax Credit (EITC): Phases out as income rises.
- Child Tax Credit (CTC): Up to $2,000 per child, subject to income limits.
- American Opportunity Tax Credit (AOTC): Up to $2,500 for college expenses.
- Saver’s Credit: Rewards retirement savings for lower-income earners.
Strategy Tip: Manage your taxable income to stay under key thresholds and maintain eligibility for credits.
Optimize Filing Status, State Taxes, and Withholding
Filing Status:
Choosing the correct filing status—single, married filing jointly, etc.—affects your tax bracket and deductions.
State and Local Taxes (SALT):
- High-tax states (e.g., CA, NY) may trigger higher effective tax rates.
- Low/no-income tax states (e.g., TX, FL) offer relief but often have higher sales/property taxes.
Withholding Adjustments: Avoid large refunds or surprise bills by fine-tuning your W-4 form based on life changes like marriage, job changes, or relocation.
Implement Tax-Efficient Investment Strategies
Oil and Gas Investments
- Immediate Deductions: Up to 80-100% of intangible drilling costs (IDCs).
- Depletion Allowances: Offset revenue from wells.
Tax Loss Harvesting
- Offset gains by realizing strategic losses.
- Carry forward up to $3,000 annually if losses exceed gains.
Tax-Advantaged Accounts
- Traditional and Roth Accounts: Build wealth while minimizing or deferring taxes.
- HSAs: Triple-tax-advantaged savings for medical expenses.
Municipal Bonds
- Generate federal (and sometimes state) tax-free income, ideal for high earners.
Opportunity Zone Investments
- Defer current capital gains and potentially eliminate taxes on new growth after 10 years.
Conclusion
The tax code may not favor W2 employees—but that doesn’t mean you can’t win the game. By understanding deductions, credits, strategic filing, and tax-efficient investing, you can lower your tax burden and build lasting wealth.
Take control. Be strategic. Build confidence.
Give Jason Noble a call today at (843) 743-2926 or call Andy Merchant at (316) 669-9413 to take the first step toward designing a tax-efficient financial plan tailored to you.
Sources:
https://www.nerdwallet.com/article/taxes/medical-expense-tax-deduction
https://www.irs.gov/taxtopics/tc456
https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit-eitc
https://www.irs.gov/credits-deductions/individuals/child-tax-credit
https://www.bankrate.com/taxes/salt-tax-deduction
https://www.cefmoilandgasinvestments.com/benefits-of-oil-and-gas-investments/
https://www.fidelity.com/viewpoints/personal-finance/tax-loss-harvesting
https://www.fidelity.com/fixed-income-bonds/individual-bonds/municipal-bonds
https://taxpolicycenter.org/briefing-book/what-are-opportunity-zones-and-how-do-they-work
This article is for general information only and should not be considered as financial, tax or legal advice. Prime Capital and its associates do not provide legal or tax advice. Individuals should consult with an attorney or professional specializing in the fields of legal, tax, or accounting regarding the applicability of this information for their situations.
Advisory products and services offered by Investment Adviser Representatives through Prime Capital Investment Advisors, LLC (“PCIA”), a federally registered investment adviser. PCIA: 6201 College Blvd., Suite#150, Overland Park, KS 66211. PCIA doing business as Prime Capital Financial | Wealth | Retirement | Wellness.
MTM-744842-2025-05-22
