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Graham Stephan - 5 ways to avoid taxes...legally

Thumbnail of the video “Graham Stephan - 5 ways to avoid taxes...legally”
Community upload. AI output has not been independently verified.
Author: Graham Stephan
Categories: Personal Finance
Tags: finance
Views: 4 · Last viewed: 2026-10-16 03:07 UTC

Short Summary

Main recommendation: Reduce your taxable income legally by using tax-advantaged accounts and strategies such as traditional 401(k) and IRA contributions, HSAs, the standard deduction, and hiring a good CPA. The video stresses that its content is for entertainment only, not tax advice, and that results depend on state, income, tax bracket, and filing status. It also covers more niche options for self-employed people, including S Corps and long-term capital gains treatment.

Key Points

  • The video's promised list of 5 ways to avoid taxes legally is: (1) traditional 401(k) contributions, (2) traditional IRA contributions, (3) Health Savings Account (HSA), (4) 457(b) plan, and (5) the standard deduction.
  • A traditional 401(k) lowers taxable income by the contribution amount, up to $19,000 per year, with taxes owed later at retirement; a solo 401(k) for self-employed people allows up to $56,000 per year.
  • A traditional IRA can reduce taxable income by up to $6,000 per year and, he says, is useful after maxing out a 401(k), with taxes deferred to retirement.
  • Additional self-employed strategies mentioned include an S Corp (distributions avoid Medicare and Social Security taxes, about 15.3%) and depreciating business or rental assets to offset income, based on his own personal experience using these strategies.
  • Holding investments longer than one year qualifies for long-term capital gains rates, 15% for those earning under $434,000, versus ordinary income rates.

Details Worth Noting

  • Concrete instructions:
    • Contribute to a traditional 401(k) through your employer to reduce taxable income; example: $80,000 income minus $10,000 contribution equals $70,000 taxable.
    • If self-employed, consider a solo 401(k), which allows up to $56,000 per year in contributions.
    • Open a traditional IRA (anyone can) and contribute up to $6,000 per year, reducing taxable income; example: $80,000 minus $6,000 equals $74,000, saving about $1,320 in taxes.
    • Consider an HSA only if you have a high-deductible plan (at least $1,350 deductible single or $2,700 family; out-of-pocket maximum no more than $6,750 single or $13,500 family). Contribute up to $3,500 per year tax-free, spent on out-of-pocket medical costs; unspent funds roll over.
    • If you work for a state or local government and your employer offers a 457(b) plan, contribute up to $19,000 per year and withdraw without penalty at any age upon retirement.
    • Take the standard deduction: $12,000 for single filers, $24,000 for married filing jointly.
    • Hold investments longer than 12 months before selling to qualify for long-term capital gains rates.
    • Make qualifying business expenses (such as equipment purchases) by December 31 of the tax year to claim the write-off in the following filing season.
    • Hire a good CPA; the speaker says he pays about $2,000 for tax filing and believes it pays for itself (his personal opinion/experience).
  • The 401(k) and IRA savings are deferred, not eliminated, since taxes are owed upon withdrawal in retirement, ideally at a lower bracket.
  • The HSA limits and the 457(b) benefit depend on specific eligibility and state rules; the speaker says to check the description links for details.
  • S Corp setup and depreciation schedules are complex and should be discussed with a licensed CPA.

Bottom Line

Combining several accounts and deductions, plus professional tax help, can meaningfully reduce what you pay each year, but eligibility and rules vary, so verify your own situation with a licensed CPA.