Hidden Tax-Saving Opportunities Most People Miss

By Grant Booth, CPA at Jacobsen & Company, LLP

For many business owners and individuals, especially those with significant income and/or $1 million or more in investable assets, taxes can quietly erode wealth.

As retirement approaches, a thoughtful tax strategy becomes just as important as your investment strategy. Yet, even seasoned business owners and professionals often overlook valuable opportunities that could save thousands of dollars every year.

Below are several of the most commonly missed tax-saving strategies to consider before year-end.

1. Overlooked Business Deductions

If you own or recently owned a business, there are several legitimate deductions that often go unclaimed.

S-Corporation Tax Savings
Many business owners pay self-employment tax on 100% of their profits, 15.3% on top of regular income tax. An S-Corporation can help reduce that burden. By paying yourself a reasonable salary (subject to payroll taxes) and taking remaining profits as distributions (not subject to self-employment tax), you can lower overall taxes when structured correctly. Just be sure your salary is reasonable and that you follow IRS guidelines. This is one of the most valuable, yet often overlooked, opportunities for small-business owners.

Telephone & Internet
If your phone or internet plan serves business purposes, a reasonably high portion of the cost often qualifies as deductible. This commonly missed deduction reflects a legitimate cost of operating almost any modern business.

Business Mileage
Tracking mileage can feel tedious, but the deduction adds up quickly. Keep a simple log noting the date, starting and ending locations, total miles, and the business purpose of each trip. You can track this easily using a mileage app or a basic spreadsheet. It’s one of my favorite deductions, because it often creates a real tax benefit without additional out-of-pocket cost. Those miles can quickly translate into a meaningful tax break under the generous IRS standard mileage rate.

Home Office Deduction
Many avoid this deduction out of audit concerns, but it is completely legitimate with proper documentation. If you regularly and exclusively use part of your home for business, you can reduce your taxable income. If your home office has four walls, a door, and is used only for business (with furnishings and setup that reflect that purpose) you have a solid foundation to claim this valuable deduction.

Qualified Business Income (QBI) Deduction
Owners of pass-through entities (sole proprietorships, partnerships, S-Corps) may be eligible for a deduction of up to 20% of qualified business income. Coordinating compensation and retirement contributions can maximize this benefit.

In Summary

Proactive planning before the year is over, not just tax filing during tax season, can make the difference between good and great outcomes.

2. Retirement Accounts as Tax Tools

Your retirement accounts can serve as both savings vehicles and powerful tax-management tools, especially after age 50.

Backdoor Roth IRA Contributions
High earners often assume Roth IRAs are off-limits because their income exceeds the contribution limits. However, the “backdoor” Roth strategy can provide a path around that restriction. It involves contributing to a traditional IRA, then converting those funds to a Roth IRA. This approach allows future growth and withdrawals to be tax-free. Be aware of the pro rata rule and other nuances that can affect the outcome. Proper tax planning is essential. When executed properly, the backdoor Roth is an excellent way for higher-income earners to build more tax-advantaged savings.

Max Out Contributions (and Catch-Ups)
Once you reach 50, take advantage of catch-up contributions to 401(k), 403(b), or 457 plans. These extra dollars can meaningfully increase tax-deferred savings.

Strategic Roth Conversions
Converting pre-tax retirement funds to a Roth IRA during lower-income years, especially before Required Minimum Distributions (RMDs) begin, can meaningfully reduce lifetime taxes. By strategically lowering taxable income through deductions or planned withdrawals, you create room to convert at more favorable rates. With careful timing, this strategy can balance current tax costs with the long-term benefit of tax-free growth and withdrawals.

Asset Location
Placing tax-inefficient investments (such as taxable bonds, REITs) inside retirement accounts and tax-efficient ones (like ETFs or municipal bonds) in taxable accounts can reduce annual drag and improve after-tax returns.

In Summary

Integrating your tax and investment strategies ensures your wealth grows and distributes efficiently.

3. Smarter Charitable Giving

Generosity and stewardship often become central as clients approach retirement. With a few adjustments, charitable giving can be both impactful and tax-smart.

Donate Appreciated Securities
Rather than donating cash, gift long-term appreciated stock. You will avoid capital-gains taxes and still receive a deduction for the full fair-market value.

Qualified Charitable Distributions (QCDs)
Once you reach 70½, you can direct IRA distributions to charity. These gifts count toward your RMD’s but are excluded from taxable income. This renders the normal restraint of needing your itemized deductions higher than the standard a non-factor.

Donor-Advised Funds (DAFs)
If you expect a high-income year, consider “bunching” future giving into a DAF. You’ll receive the deduction now, then recommend grants to charities over time.

Charitable Bunching
Combining multiple years of giving into one tax year can push you over the standard-deduction threshold and allow you to itemize again, giving you a tax benefit for the giving you already planned to do.

In Summary

Strategic giving lets you support the causes that matter most while ensuring more of your resources go where you intend.

4. Timing and Coordination Matter

Taxes should never be managed in isolation. The best outcomes come when your CPA, financial advisor, and estate planner work together. That coordination helps you:

• Smooth income across years to stay in favorable tax brackets.
• Time capital gains and charitable gifts strategically.
• Align investment withdrawals with your tax and lifestyle considerations.

For many high-net-worth pre-retirees, the window between peak earning years and RMD age (currently 73 for many) offers a unique opportunity to reshape your long-term tax picture. Strategic planning now can reduce lifetime taxes and extend portfolio longevity.

5. Take Action Before Year-End

By tax season, most planning opportunities have already passed. Before December 31, review your situation and confirm you have maximized:

• Mileage, home-office, or other deductions
• 401(k), IRA, or Roth contributions (including catch-ups)
• Charitable giving options like QCDs, appreciated stock, or DAFs
• S-Corp salary and distribution structure
• Roth conversion opportunities

Thoughtful steps now can deliver long-term results later and align your finances with the purpose and values that guide your next chapter.

Grant is a Partner at Jacobsen & Company, LLP, a Des Moines based CPA firm serving business owners, nonprofits, and high-net-worth families. With 12 years of experience in public accounting, Grant helps clients design proactive tax, retirement, and charitable strategies that align with their long-term goals. “I love helping clients understand their tax situation and seeing how simple steps can often make a big difference in their tax bill.”

Grant lives in Ankeny, Iowa, with his wife and three children. He serves as treasurer of Ankney Baptist Church and volunteers in several local ministries.

gbooth@jacobsencpa.net | 515-317-7599