Essential Tax Strategies for Young Professionals

If I were in my 20s or 30s, here is exactly how I would avoid paying taxes on about 42% of my income. Legally.

I'm Tyler. I'm a former financial advisor and portfolio manager. Now I make financial content for free so that you don't have to pay for it.

1. Maximize Your 401(k)

Let's assume I make $90,000 a year. I would put $23,000 into a 401(k) and try to get the employer match. No brainer. Anyone who tells you not to is selling you insurance.

2. Invest in a Roth IRA

Next, I'd put $7,000 in a Roth IRA and invest it aggressively. There is an income cap to contribute to these, so do it while you can and do it while you're young and in a super low tax bracket.

3. Utilize Health Savings Accounts

If I had a high deductible health plan, I would max out my Health Savings Account (HSA) with $4,300. I’d invest it in low-cost index funds, and trust me, your future sick self will say thank you.

4. Take Advantage of Deductions

Then I'd turn around and take the $15,000 single filer deduction, telling the government I only made $47,700. This would allow me to go from the 22% to the 12% tax bracket.

5. Think Long-Term

At this rate, I will most likely become a millionaire in just over 15 years. In the words of Ferris Bueller, life moves pretty fast. If you don't stop to look around once in a while, you might just miss it.

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