I Asked ChatGPT How To Lower My Tax Bill Legally, and It Gave Me This Strategy
Written by
Laura Beck
Edited by
Molly Sullivan
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
I asked ChatGPT for legal ways to lower my tax bill. The artificial intelligence delivered a detailed playbook covering everything from quick wins anyone can use to advanced strategies for self-employed workers.
ChatGPT organized the advice into three categories: fast wins most people miss, bigger opportunities for freelancers and long-term wealth-building strategies that reduce taxes year after year.
Max Out Pretax Accounts First
ChatGPT started with retirement accounts because they reduce taxable income dollar-for-dollar. The 401(k) contribution limit hits $24,500 for 2026, with workers ages 50 and older eligible for catch-up contributions bringing the total to a potential $35,750, depending on your age.
Traditional IRA contributions max out at $7,500 in 2026 with an additional $1,100 catch-up for those 50 and older.
Health savings accounts earned special praise from ChatGPT as the “holy grail” of tax advantages. The 2026 limits are $4,400 for individual coverage and $8,750 for family coverage. HSAs offer triple tax benefits: deductible contributions, tax-free growth and tax-free withdrawals for medical expenses.
Standard Deduction Beats Itemizing for Most
The standard deduction for 2025 is $16,100 for single filers and $32,200 for married couples filing jointly. ChatGPT advised taking this unless itemized deductions exceed those amounts.
Common itemized deductions include mortgage interest, state and local taxes capped at $10,000, charitable donations and medical expenses exceeding 7.5% of adjusted gross income.
Tax Credits Trump Deductions
ChatGPT wrote that tax credits reduce taxes dollar-for-dollar while deductions only reduce taxable income. The child tax credit provides up to $2,200 per qualifying child under 17.
The child and dependent care credit covers up to 35% of qualifying care expenses, with caps based on the number of children. Education credits including the American opportunity credit and lifetime learning credit help offset college costs. Electric vehicle and energy efficiency credits reward green purchases.
Self-Employed Workers Have Huge Opportunities
ChatGPT flagged business expense deductions as commonly overlooked. Legitimate write-offs include home office space even if only partial, internet and phone bills, work-related subscriptions, mileage or actual vehicle expenses, equipment and software, and business meals at 50% deductibility.
The AI noted the standard for deductions is “ordinary and necessary,” but the bar sits lower than most people think.
Solo 401(k) plans emerged as one of the largest legal tax shields available. Self-employed workers can contribute up to $72,000 in 2026 through combined employee and employer contributions. SEP IRA contributions max out at 25% of net self-employment income.
ChatGPT recommended quarterly estimated tax payments not to reduce taxes but to avoid penalties and improve cash flow planning.
Long-Term Tax Reduction Strategies
Owning tax-favored assets changes the game over time. Real estate provides depreciation deductions. Index funds generate lower capital gains taxes than frequent trading. Municipal bonds pay tax-free interest.
ChatGPT explained this is how wealthy people reduce taxes legally without breaking rules.
Tax loss harvesting lets investors sell losing positions to offset gains. Taxpayers can deduct up to $3,000 per year in net capital losses against ordinary income and carry forward unlimited losses to future years.
Timing income and deductions strategically saves money. Delaying income to January while prepaying deductible expenses in December shifts tax liability. Bunching charitable donations into one year instead of spreading them out can push itemized deductions above the standard deduction threshold.
Fix Your Withholding
Many workers overpay taxes all year and give the IRS an interest-free loan. ChatGPT advised updating Form W-4 to align withholding with actual tax liability. The goal is owing a little or getting a small refund instead of a large check in April.
When Professional Help Pays Off
ChatGPT suggested workers earning over $100,000 should consider hiring a CPA. Tax professionals typically pay for themselves through proper income structuring, identifying missed deductions and advising on business entity setup like choosing between LLC and S-Corporation status.
The Five Most Important Moves
ChatGPT distilled the advice into five priorities: max retirement accounts, use a health savings account, claim all business deductions, take tax credits seriously and plan income timing strategically.
The AI offered to create a personalized tax-saving checklist if provided with employment type, income range and state of residence. Different situations call for different strategies.
More From GOBankingRates
