If you've experienced a rise in your wages this year, it may come with some mixed feelings. On one hand, it's great news — higher income can help keep pace with rising costs in areas like food, housing, and transportation. On the other hand, that increased income might just bump you into a higher tax bracket, leading to a phenomenon known as tax-bracket creep. This can be especially pronounced in periods of high inflation, when wage increases push you into higher tax brackets. The result? A double hit to your wallet: higher costs for everyday goods and a potentially bigger tax bill.

While the federal government does adjust marginal tax brackets for inflation, it doesn't make corresponding adjustments to many credits, deductions, exemptions, and surcharges. This means that even though you may be earning more, your effective tax rate could still increase. One key tax to be aware of is the Net Investment Income Tax (NIIT), a 3.8% surtax on investment earnings such as capital gains, dividends, and interest. If your income surpasses $200,000 (for single filers) or $250,000 (for married couples), the NIIT kicks in — and it's something that can impact your bottom line, especially as house prices and bond yields continue to rise.

Here’s a rundown of 8 effective steps to reduce taxes on your investment earnings and prevent tax-bracket creep:

1. Maximize Retirement Contributions

One of the most effective ways to reduce your taxable income is by contributing to retirement accounts like your 401(k) or IRA. These contributions directly reduce your taxable income, meaning you're taxed on a lower amount.

For 2025, you can contribute up to $23,500 to your 401(k) if you're under 50, or up to $30,000 if you're 50 or older. IRAs offer a $7,000 contribution limit ($8,000 if you're 50 or older), which also comes with tax benefits. Additionally, these contributions help you build a secure retirement, ensuring that you don't just reduce taxes now, but also strengthen your financial future.

If you're interested in more stable investment options, Compound Real Estate Bonds (CREB) offers an attractive alternative. CREB offers high-yield savings bonds backed by real assets and U.S. Treasuries, providing 8.5% APY with no fees and the flexibility of anytime withdrawals. This could be a great fit if you're looking to grow your wealth while minimizing your tax burden.

2. Leverage Your Health Savings Account (HSA)

If you have a high-deductible health plan (HDHP), consider contributing to an HSA. These accounts are triple-tax-advantaged — contributions are tax-deductible, the growth is tax-free, and withdrawals for qualified medical expenses are tax-free as well.

For 2025, the contribution limit for individuals is $4,300, and for families, it's $8,550, with an additional $1,000 in catch-up contributions for those 55 and older. An HSA can be a powerful tool for reducing your taxable income, especially as healthcare costs continue to rise.

3. Defer Payouts and Payments

If you're expecting a taxable gain from the sale of assets like real estate or stocks, consider deferring the sale until the following year. By doing so, you may be able to stay in your current tax bracket or avoid triggering the NIIT.

Additionally, if you’ve received severance pay or other lump-sum payments, delaying them could help you stay in a lower tax bracket, especially if you expect to be in a lower tax bracket next year.

4. Make the Best Use of a Roth Conversion

Roth IRAs are one of the best tools for minimizing taxes on your investment earnings. While converting a traditional IRA to a Roth IRA is taxable, once the funds are in the Roth, you won’t have to pay taxes on future withdrawals. This can be especially valuable in retirement, as you’ll have tax-free income.

If you’re worried about taxes now, a Roth conversion may reduce the value of your traditional IRA and help lower required minimum distributions (RMDs) later on.

5. Tax-Loss Harvesting

Tax-loss harvesting involves selling investments that have decreased in value to offset gains from other investments. This can help reduce your taxable income and, in some cases, even offset up to $3,000 of ordinary income. However, be mindful of the wash-sale rule, which disallows claiming a loss on a sale if you buy the same or a substantially identical investment within 30 days.

6. Make Full Use of Asset Location

Different types of investment accounts are taxed differently. For example, tax-deferred accounts like 401(k)s and traditional IRAs don’t require you to pay taxes on the income or gains each year. However, brokerage accounts require you to pay taxes annually on income and capital gains.

To minimize taxes, consider placing higher-tax investments (like bonds) into tax-deferred accounts. Alternatively, you can place tax-efficient investments like stocks or ETFs in taxable accounts.

7. Deductions for Charitable Contributions

If you’re charitably inclined, consider making a donation to reduce your taxable income. Charitable donations are deductible if you itemize your deductions, which could potentially lower your taxable income.

Additionally, if you’re planning on making large charitable contributions, you can "bunch" your donations into a single year to exceed the standard deduction threshold, giving you a bigger tax break in that year.

8. Qualified Charitable Distributions (QCDs)

For those who are 70½ or older, Qualified Charitable Distributions (QCDs) allow you to donate directly from your IRA to charity, satisfying your required minimum distribution (RMD) without incurring taxes on the distribution. QCDs can be a strategic way to reduce your taxable income while supporting a cause you care about.

As you can see, there are many strategies to reduce your tax burden and avoid the pain of tax-bracket creep. But if you’re looking for a stable, tax-efficient way to grow your wealth, consider Compound Real Estate Bonds. With 8.5% APY, no fees, and a flexible withdrawal policy, CREB provides an excellent investment option to reduce taxes while earning fixed income, particularly in times of inflation and rising interest rates.

Be sure to consult with your tax advisor to tailor these strategies to your unique financial situation, and consider making CREB part of your investment strategy to maximize both your returns and tax savings.

Conclusion: Smart Tax Planning Pays Off

Reducing the tax burden on your investment earnings isn't just a smart financial move — it's essential for long-term wealth building. From maximizing contributions to retirement accounts and HSAs, to strategically timing asset sales and leveraging Roth conversions, each tactic offers a way to protect more of what you earn. With careful planning, even high earners can avoid tax-bracket creep and preserve more of their gains.

In a landscape where taxes and inflation can chip away at your returns, stability becomes just as important as growth. That’s where options like Compound Real Estate Bonds (CREB) can shine. With an 8.5% APY, no fees, and anytime access to your funds, CREB offers a tax-efficient way to generate reliable income without the volatility of traditional markets.

Remember, tax strategies are not one-size-fits-all. Your financial goals, income level, and investment timeline all play a role in determining the best approach. Work with a qualified tax professional to create a plan that aligns with your goals — and consider including a stable, high-yield product like CREB to help you build wealth with confidence and peace of mind.

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