Nobody likes paying taxes. In fact, I've filed for tax extensions the past two years in a row, which is probably why I asked ChatGPT how to (legally) avoid them altogether.
The chat AI complied, and its answers ranged from smart, everyday moves to high-power strategies that feel out of reach for most people. Keep reading to see which ones you could take advantage of.
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Max out tax-advantaged retirement accounts
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When asked about tax avoidance, ChatGPT prioritized retirement and told me to "Contribute the maximum to tax-deferred accounts like a 401(k), 403(b), or traditional IRA if you qualify."
"Contributions reduce your taxable income today, so you pay less in taxes this year while also forcing yourself to save for retirement," it went on to note. "If your employer offers a match, contribute at least enough to capture the full match."
That's sound advice. Any financial planner or money blogger would admonish you to do the same.
Use an HSA if you're eligible
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Next, ChatGPT suggested an HSA. "A Health Savings Account (HSA) is one of the rare 'triple tax-advantaged' vehicles: contributions are tax-deductible (or pretax through payroll), earnings grow tax-free, and qualified medical withdrawals are tax-free."
This advice also checks out. While HSAs are often underutilized, they provide tremendous tax benefits.
Harvest tax losses
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After some straightforward advice, ChatGPT then suggested tax-loss harvesting.
Its language got a bit technical. ChatGPT told me, "Tax-harvesting means selling investments that have dropped in value to realize capital losses, which you can use to offset capital gains and up to a limited amount of ordinary income. This reduces your taxable gains for the year without changing your long-term investment plan if you repurchase similar assets appropriately. Be mindful of wash-sale rules and transaction costs. Loss harvesting is most useful in taxable brokerage accounts — it doesn't apply inside IRAs/401(k)s."
While not inaccurate, I wish ChatGPT had used simpler language to explain how tax harvesting works. Essentially, though, it means selling investments at a loss to lower your overall tax bill, but be aware that certain rules and restrictions apply.
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Time income and deductions
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ChatGPT also pointed out that shifting when income is received or deductions are taken can change your tax bracket for the year.
"If you expect to be in a lower bracket next year, defer bonuses; if you expect higher future rates, accelerate deductions or take conversions now," it said. "For some, prepaying certain deductible expenses (when allowed) or bunching charitable gifts into one year can create bigger deductions."
Favor tax-efficient investments
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I had to reread ChatGPT's next bit of "wisdom" a few times.
"Hold tax-inefficient assets in taxable accounts. Municipal bonds from states where you pay state tax can be tax-exempt at the federal — and sometimes state — level," it said. "Also prioritize tax-managed funds or low-turnover ETFs in taxable accounts to minimize annual capital gains distributions. Asset location is as important as asset allocation when it comes to after-tax returns."
Again, the language could have been more accessible — and the advice more applicable to the typical taxpayer.


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Use 529 plans
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Next up, ChatGPT talked about college savings. ChatGPT advised me, "If you're saving for a child's college, a 529 plan offers tax-free growth for qualified withdrawals. Many states also offer state tax deductions or credits for 529 contributions."
That's a decent, high-level overview of how 529 plans work, but it doesn't convey how useful and multi-purpose these plans can truly be. Additionally, I'm disappointed ChatGPT didn't prioritize this advice higher up on the list. The advice is far more relevant than tax-harvesting or exotic charitable giving vehicles.
Donate appreciated assets instead of cash
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After 529 plans, ChatGPT suggested ways to leverage appreciated assets.
"If you give long-term appreciated stocks or mutual funds directly to a qualified charity, you can generally deduct the fair-market value and avoid paying capital gains tax on the appreciation," it said. "For large, ongoing gifts consider donor-advised funds (DAFs) to bunch several years of contributions into one tax year."
This is fact-based. DAFs are a tax-privileged way to manage substantial charitable giving — and a favorite among donors who want to keep their money safe from the government.
Run a legitimate side business
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Here, I had to chuckle. ChatGPT is suggesting I run a side business so I can save money on taxes.
"Run a legitimate gig or side business to reduce taxes through business-expense rules. Structure it properly and take only legitimate business deductions — home-office (if you qualify), equipment, software, mileage, and professional services can reduce your net business income subject to tax."
Really? Bless your heart, ChatGPT. Why doesn't it suggest I go a step further? Like cease working and go live in my car? Then I'd have $0 tax liability.
For some people, like the ultra-wealthy, this strategy — of setting up a side business may make sense. It can open the door to a wider menu of tax breaks. But for the average person, this advice could lead them wildly astray.
Claim tax credits where available
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Next up, ChatGPT urged me to claim available tax credits.
"Tax credits reduce your tax bill dollar-for-dollar and — if refundable — can increase your refund. Familiarize yourself with credits you may qualify for, like earned income credit, child tax credit, education credits, and energy-efficient home credits. These can be far more valuable than deductions."
This is true. While some restrictions apply, there are many popular tax credits that go unclaimed because people are unfamiliar with them.
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Leverage Roth IRA conversions
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Lastly, ChatGPT rounded out its advice by suggesting backdoor Roth conversions.
"Roth accounts mean paying taxes now for tax-free withdrawals later. Converting in lower-income years can lock in decades of growth, but it bumps up your taxable income that year and may affect benefits — so small, planned conversions usually work best."
While accurate, Roth IRA conversions aren't always as good an idea as ChatGPT implies. A conversion can be worth it in some scenarios, but not always. Working directly with a tax professional can help you decide what strategies work best for you.
Bottom line
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Most of ChatGPT's advice on tax money moves was pretty good, as I've come to expect. It knows how to scour the internet and read finance headlines and investment broker material.
ChatGPT scrubs the internet to repackage existing information — good and less than good — into general talking points. Whatever advice it gives you, you'll still probably need to use Google to vet the results.
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