You don’t need to become a tax expert—but understanding how taxes affect your income, investments, and financial choices can be a powerful form of leverage. For women in peak earning years, often balancing multiple roles and responsibilities, building tax knowledge isn’t just about saving money—it’s about gaining clarity, confidence, and control.

Whether you’re leading in your career, supporting your family, managing business interests, or starting to think about retirement, the decisions you make today have long-term tax implications. Understanding how taxes affect our financial lives empowers us to ask better questions, be better advocates for ourselves and make informed decisions.

Building Your Tax Knowledge: What to Know Now

When it comes to taking ownership of your financial future, here are several foundational tax concepts to consider:

Tax Brackets

The U.S. tax system doesn’t tax all your income at one flat rate. Instead, it uses brackets—meaning your income is divided into chunks, and each chunk is taxed at a different rate. As your income increases, more of it gets taxed at higher rates, but only that portion.

Here’s a simple way to think about it:
Imagine your income as water filling a series of buckets. Each bucket (or bracket) can only hold a certain amount before the overflow spills into the next. The first bucket is taxed at 10%, the next one at 12%, then 22%, and so on. You only pay the higher rate on the dollars that “spill over” into the higher buckets.

So, if your highest tax bracket is 32%, that rate only applies to the top portion of your income—not the entire amount you earn. Most of your income is actually taxed at lower rates.

Understanding which bracket you’re in can help you make smarter choices. For example:

• Should you take that bonus this year or wait until next year?
• Is now a good time to convert part of your traditional IRA to a Roth?
• How much can you withdraw from an account before bumping into a higher tax rate?

A little knowledge about brackets can go a long way in helping you keep more of what you earn.

Tax-Deferred vs. Tax-Free Accounts

Not all retirement and savings accounts are taxed the same. For instance:

• Traditional IRAs and 401(k)s are tax-deferred: you contribute pre-tax dollars, which grow tax-free, but you’ll pay ordinary income tax on withdrawals later.
• Roth IRAs and Roth 401(k)s are tax-free on withdrawal: you contribute after-tax dollars, and qualified withdrawals in retirement are tax-free.
• Health Savings Accounts, or HSAs, are unique in that they offer a triple tax benefit: contributions are tax-deductible, growth is tax-free, and withdrawals taken for qualified medical expenses are also tax-free.

Understanding how each account is treated can influence both how you save and the order in which you draw down funds in retirement.

Common Deductions and Credits

Tax deductions reduce your taxable income, while credits reduce the amount of tax you owe, dollar-for-dollar. Knowing which ones apply to your life can significantly reduce your tax liability. Examples include:

• Charitable contribution deductions (especially for those who itemize)
• Energy efficiency credits for solar panels or certain home improvements
• Education credits, like the Lifetime Learning Credit or American Opportunity Tax Credit
• Medical-related deductions, such as for long-term care insurance premiums (subject to age limits and Adjusted Gross Income (AGI) thresholds), out of pocket co-pays & deductibles,
• Child tax credits for children under age 17 that you claim as dependents

Many deductions and credits have income limits or specific qualifications, so understanding what applies to your situation can help you be more strategic throughout the year—not just at tax time.

Capital Gains and Investment Taxes

When you sell an investment (stock, bond, mutual fund, real estate) for more than you paid, the profit is considered a capital gain, and how it’s taxed depends on how long you held the investment:

• Short-term gains (held <1 year) are taxed as ordinary income rates (see the description of tax brackets, above), which could be as low as 10% or 12%, or  22%, 24% or more.
• Long-term gains (held >1 year) are taxed at preferential rates—0%, 15%, or 20%, depending on your income.

This means that timing matters. Understanding cost basis, harvesting losses, and how investment income interacts with your other income streams can help you preserve more of your net returns.

Life Events That Can Affect Your Tax Bill

Major life changes often come with tax implications. Consider how these moments might affect your situation:

• Marriage, divorce or death of a spouse can shift your filing status, alter deductions, and change how you’re taxed on income or alimony.
• Starting a business can open the door to new deductions and retirement savings vehicles—but also new tax filing responsibilities.
• Retirement means transitioning from earning income to drawing it down, often from multiple accounts with different tax treatments. Strategic planning here can help you avoid unexpected spikes in tax liability.

Being aware of how these shifts intersect with the tax code allows you to plan ahead and avoid surprises.

How Charitable Giving May Reduce Taxes

If philanthropy is part of your life, aligning your giving with your tax strategy can create a win-win: you support the causes you care about and reduce your tax bill. A few ways to do this include:

• Donating appreciated stock instead of cash. When you give investments that have grown in value, you can avoid paying capital gains tax and deduct the full market value (if you itemize deductions).
• Qualified Charitable Distributions (QCDs) from IRAs. If you’re 70½ or older, you can give up to $100,000 per year directly from your IRA to a qualified charity. This counts toward your required minimum distributions (RMDs) but isn’t included in your taxable income.
• Using a Donor-Advised Fund (DAF). A DAF allows you to make a charitable contribution in one year, take an immediate tax deduction, and then recommend grants to charities over time. It can also be useful if you want to “bunch” several years’ worth of giving into one high-income year for tax purposes, while still supporting nonprofits gradually.

Understanding the tax rules around charitable giving can help you give more strategically—and sometimes, more generously—without affecting your lifestyle or retirement goals.

If you’re curious about how these strategies might apply to your own situation, or if you want to feel more confident in your understanding of taxes, connecting with a financial planner can be a great next step.

Johnson Bixby and Private Client Services do not offer tax or legal advice. Always consult a tax or legal professional regarding your individual situation.