By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
The panel agrees that the article oversimplifies tax strategies for middle-income earners, with temporary changes creating confusion and potential risks. The key debate lies in whether this complexity drives demand for professional help or leads taxpayers to avoid these strategies due to audit fears.
Risk: Rising IRS audit rates for high-income filers and the temporary nature of recent tax changes
Opportunity: Potential increase in demand for tax preparation and software services due to legislative shifts
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
With tax season in full swing, you might be looking for ways to lower your bill — or even get money back. A new Stacker analysis reveals three key optimization strategies the wealthy use to reduce their taxes: incorporating to pay a lower corporate rate, using the “buy, borrow, die” strategy to avoid capital gains, and tax-loss harvesting to offset gains (1). But could these tax strategies be adapted for households with more typical incomes? While not all will apply, some may be accessible to middle- and upper-middle-class earners, too. Beyond these strategies, 2026’s temporary tax changes — like the expanded SALT deduction cap and a new seniors’ deduction — could help keep more of your money, even if you’re not a millionaire. If you’re self-employed, one way to potentially save thousands in taxes is by incorporating your business. That means creating a corporation and classifying your earnings as business income. That way, you pay a lower tax rate on that money. Personal income tax rates at the federal level range from 10% to 37%, but total taxes — including state and local taxes — could end up being much higher (2). Since 2018, the federal corporate tax rate has sat at 21%. Even when accounting for state corporate taxes (which are below 10%), the total could still come in lower than your personal tax rate (3). If you are a business, that turns your salary into an expense — and business expenses are deductible. It’s the same story with health insurance premiums, accounting fees and business vehicle costs. However, your salary will still be taxed at your personal rate, while you keep the rest of your money tied up in the business, to be taxed at the corporate rate. Some estimates say that if you make, at minimum, a net of $60,000 in freelance or small-business income, you may save money overall by incorporating — meaning you don’t have to be a millionaire to benefit from this strategy. However, incorporating also comes with a significant administrative burden — so you’ll have to weigh the pros and cons carefully. It’s worth talking to a lawyer and your accountant before making any moves (4). A second option is turning income into a loan — aka the “buy, borrow, die” strategy, in which you purchase appreciating assets like stocks, art or real estate, and then borrow against them for your income instead of selling. “Upon death, it may be possible to transfer collateral assets to a beneficiary without paying capital gains tax,” according to Stacker (1). Related: 7 ways to grow your tax refund This strategy uses capital losses to your advantage by reducing the tax you owe. In a year where you owe capital-gains tax on assets you have cashed out, you can offset this by strategically selling a different asset at a loss. This can be used against gains you have already realized, or gains you anticipate in the future, according to JP Morgan (5). Read More: 5 essential money moves to make once you’ve saved $50,000 Read More: Young millionaires are ditching stocks. Why older Americans should take note While turning income into a loan or tax-loss harvesting may not be realistic for most with a modest income, there are other ways to trim your tax bill. For example, make sure you’re not missing out on opportunities to reduce your taxable income. “Keep an eye on credits and deductions you may be able to claim for medical treatments, training and education, moving (relocating), working from home, donating to charity and other costs,” the Stacker analysis suggests (1). While it’s too late to top up your 401(k) for the 2025 tax season, you can aim to max out any tax-advantaged retirement accounts this year for next season. Since funds are contributed on a pre-tax basis, they don’t count toward your income for the year. Instead, you pay taxes later on, when you withdraw funds in retirement, when you are ideally in a lower tax bracket. In 2026, you can contribute up to $24,500 in your 401(k), 403(b), governmental 457 plan or Thrift Savings Plan. The catch-up contribution limit has increased to $8,000 for those 50+ and $11,250 for those aged 60 to 64 (6). Meanwhile, temporary tax changes this year could also help lower your tax bill. These include: - a maximum $200 increase in the child tax credit - a standard deduction increase of $750 for single filers and $1,500 for joint filers - a new deduction up to $25,000 for tip income - a new deduction up to $12,500 for overtime income (7) Another change is the state and local tax (SALT) deduction cap increase, in which you itemize tax breaks rather than claiming the standard deduction, to reduce your federally taxable income. From 2018 to 2024, the cap was set at $10,000 for single filers and $5,000 if married and filing separate returns. Under the One Big Beautiful Bill (OBBB), enacted in July 2025, that cap has jumped to $40,000 (or $20,000 if married and filing separately) for the 2025 tax year, increasing 1% each year until 2030 — when it will drop back to $10,000 (8). However, this is likely to benefit high earners the most, according to an analysis by the Tax Foundation (9). Those in states with higher tax rates, like New York or California, could also benefit. “Essentially, if your combined property taxes and state income taxes (or sales tax) exceed the standard deduction, the SALT tax deduction will likely save you money,” according to online tax platform TaxAct (10). For the 2025 to 2028 tax years, seniors 65+ will be able to claim a temporary bonus of $6,000, or $12,000 for married couples, to lower their taxable income. However, it will phase out for higher earners, at $75,000 for an individual filer or $150,000 for married individuals (11). Tax optimization isn’t just for millionaires. While some middle- to upper-middle-class earners can take advantage of tax optimization strategies used by the wealthy, those with a more modest income may still be able to benefit from temporary tax changes. They’re worth looking into, so you can keep more of your hard-earned money in your pocket. Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now. We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines. Stacker (1); The Tax Foundation (2, 7, 9); 1-800-Accountant (3); ReInvestWealth (4); JP Morgan (5) Internal Revenue Service (6, 11); Thomson Reuters (8); TaxAct (10) This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Four leading AI models discuss this article
"The article oversells accessible 'hacks' while underselling the unglamorous truth: for non-millionaires, tax optimization is 90% boring (401k maxing, deduction tracking) and 10% strategy, yet the article inverts that ratio."
This article conflates tax *planning* with tax *optimization*, and the distinction matters enormously. Most strategies described—incorporating at $60k+ income, buy-borrow-die, SALT deduction expansion to $40k—require either substantial assets, professional advice costs that erode savings, or legislative permanence that doesn't exist. The 2026 'temporary' changes are politically fragile; the SALT cap reverts to $10k in 2030, and the seniors' deduction expires. For median earners, the real value lies in boring mechanics: maxing 401(k)s, tax-loss harvesting on existing portfolios, and claiming overlooked credits. The article's framing—'hacks millionaires use, adapted for you'—risks steering middle-class readers toward complexity with negative ROI.
If OBBB remains law and SALT expansion holds past 2030, high-earner tax savings could be substantial enough to shift consumption patterns and boost discretionary spending in high-tax states; the article may understate the political durability of these provisions.
"The article conflates high-net-worth liquidity-based tax strategies with basic tax-advantaged retirement planning, misleading the average reader about the actual cost-benefit of incorporating."
The article frames tax optimization as a 'hack' for the masses, but this is dangerously reductive. Strategies like 'buy, borrow, die' require significant liquidity and a portfolio of highly liquid, low-volatility collateral to avoid margin calls—risks the average earner simply cannot manage. While the OBBB tax changes, specifically the SALT cap hike to $40,000, provide immediate relief for high-earners in high-tax states like CA or NY, the administrative costs of incorporating for a $60,000 net income often negate the tax savings. The real takeaway isn't 'wealthy hacks,' but rather that fiscal policy is currently skewed toward temporary, bracket-specific relief that complicates long-term retirement planning.
One could argue that even modest tax savings compound significantly over decades, and dismissing these strategies as 'for the wealthy' ignores the democratization of financial planning tools that reduce the barrier to entry for middle-class tax efficiency.
"Temporary federal tax changes and increased complexity will raise demand for tax-prep, payroll and advisory services, benefiting tax-software and accounting firms."
The article correctly flags that wealth-management maneuvers (incorporation, buy-borrow-die, tax-loss harvesting) matter beyond the ultrawealthy, but the practical takeaway is that complexity and cost will drive demand for advice and software. Temporary 2025–2028 changes (SALT bump, seniors’ deduction, higher standard deduction, new tip/overtime deductions) create both planning opportunities and confusion; taxpayers and small-business owners will likely pay for help. That lifts outlooks for tax-prep and payroll/software providers (e.g., INTU, HRB, PAYX) and for accountants/legal firms. Key missing context: payroll tax consequences, state conformity differences, AMT and audit risk, plus the administrative cost that can nullify theoretical savings.
Many middle-income households won’t pursue these strategies because fees, complexity and audit risk outweigh savings, so revenue upside for advisors/software could be modest; and temporary provisions mean any benefit may be short-lived.
"These strategies and temporary tax breaks disproportionately benefit upper-middle earners with advisors, while administrative burdens and risks deter modest households from meaningful savings."
The article overhypes tax strategies' accessibility for middle-income earners, glossing over key pitfalls: incorporating as a C-corp risks double taxation on distributions (corporate 21% + personal dividend rates), plus payroll compliance and self-employment tax nuances often make S-corps preferable with pass-through taxation. 'Buy, borrow, die' demands substantial appreciating assets and tolerance for margin debt amid 5%+ borrowing costs. Tax-loss harvesting helps but wash-sale rules limit it. 2026 changes like expanded SALT ($40k cap) and seniors' deduction are temporary (expire 2030), phasing out above $75k/$150k AGI, favoring high earners in CA/NY. IRS audit rates on high-income filers are rising 50%+ per recent data—proceed cautiously.
For self-employed netting $100k+ in low-regulation states, incorporating could genuinely save 10-15% effective tax via deductions, while temporary SALT hikes juice disposable income for 20M+ itemizers, boosting spending.
"Rising audit rates could suppress middle-class adoption of tax strategies, undermining the software/advisor revenue thesis."
Grok flags audit risk rising 50%+ for high-income filers—critical omission from the broader panel. But nobody's quantified the actual IRS enforcement capacity or audit probability for specific strategies (e.g., aggressive SALT claims vs. incorporation). ChatGPT's software-demand thesis assumes compliance complexity drives spending, yet if audit risk spikes materially, risk-averse middle-class filers may *avoid* these strategies entirely, flattening advisor/software revenue upside. That's a second-order effect worth testing.
"Regulatory complexity acts as a secular growth driver for tax-software and accounting firms, regardless of individual taxpayer appetite for aggressive tax avoidance."
Claude, your skepticism on audit risk is valid, but you're missing the 'complexity trap.' Even if audit fears rise, the 2026 legislative shifts are so opaque that taxpayers will pay for professional guidance simply to avoid non-compliance, regardless of whether they pursue aggressive tax 'hacks.' ChatGPT's revenue thesis for INTU and HRB holds because confusion, not just strategy, drives demand. The middle class isn't avoiding accountants; they’re terrified of the IRS, which is a bullish tailwind for tax-tech.
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"Elevated IRS audit risks and temporary tax changes will drive conservative filing behavior, limiting sustained revenue gains for tax software like INTU/HRB."
Gemini, complexity drives advisor demand only if taxpayers chase 'hacks'—but my audit-risk flag (50%+ rise for $400k+ filers per IRS data) combined with temporary OBBB provisions (SALT expires 2030) likely herds middle-class toward standard deductions, not TurboTax upgrades. INTU/HRB see one-off 2026 revenue pop, then reversion flattens growth; Claude's avoidance thesis trumps your trap.
The panel agrees that the article oversimplifies tax strategies for middle-income earners, with temporary changes creating confusion and potential risks. The key debate lies in whether this complexity drives demand for professional help or leads taxpayers to avoid these strategies due to audit fears.
Potential increase in demand for tax preparation and software services due to legislative shifts
Rising IRS audit rates for high-income filers and the temporary nature of recent tax changes