I Asked ChatGPT How To Avoid Paying Taxes: Here’s What It Said
Written by
John Schmoll
Edited by
Rebekah Evans
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Alternative Intelligence (AI) is a growing force in culture. No longer a pie-in-the-sky issue, AI is a helpful tool people can use to manage daily life. A growing area of usage is asking ChatGPT and other generative AI tools for financial wisdom. Approximately half of Americans use AI for help with their personal finances, according to an Empower study.
GOBankingRates decided to put ChatGPT to the test and ask it how to avoid paying taxes. It provided legal guidance for how the tax code helps willing Americans to avoid paying taxes. Below is what the chatbot had to say.
Also here’s what ChatGPT thinks will happen if President Trump ends Income Taxes.
Earn Less Taxable Income on Purpose
The tax code allows Americans a good way to deliberately lower their taxable income. In fact, there are two ways Americans can do this: saving for retirement and for healthcare costs.
ChatGPT advised people to max out pre-retirement accounts, such as a 401(k) or traditional IRA. According to the IRS, Americansd can contribute up to $23,500 into their 401(k) plans in 2025 and up to $8,000 into a traditional IRA. Although, the AI erroneously stated $23,000 as the maximum someone can put in a 401(k) for the 2025 tax year.
A Health Savings Account (HSA) is a no-brainer, according to ChatGPT. “HSA contributions are triple tax-advantaged: deductible going in, grow tax-free and aren’t taxed when used for qualified health expenses,” ChatGPT wrote.
Take Advantage of Tax Credits
Reducing your taxable burden or increasing tax refunds is something Americans can do legally, thanks to tax credits. “Tax credits reduce your tax bill dollar-for-dollar and can wipe it out entirely,” the AI chatbot wrote.
ChatGPT then provided three tax credits available to many Americans: the child tax credit, the earned income tax credit (EITC) and the American Opportunity Credit, which is for qualified college expenses.
Reduce Taxable Gains Through Smart Investing
Yes, Americans can lower their taxable burdens with prudent investing moves. Tax-loss harvesting is one popular tool that ChatGPT said could reduce taxes. In short, tax-loss harvesting allows investors to sell investments with losses and use that loss to offset taxable capital gains, allowing investors to offset a maximum of $3,000 of ordinary income.
The AI added that holding investments over a year before selling at a gain could be a way to reduce capital gains taxes. Roth IRAs are a good tool to use to reduce taxes, too. “Investments grow tax-free and withdrawals are tax-free in retirement,” ChatGPT wrote, pointing out a powerful perk of Roth accounts.
Offset Income With Deductions
Deductions are a helpful way to reduce taxable liability, although not quite as powerful as credits. ChatGPT missed some opportunities with this recommendation.
For example, it erroneously claimed the deduction for married couples is $29,000 for the 2025 tax year. According to the IRS, the standard deduction is $30,000, for an increase of $800 versus the 2024 tax year.
The chatbot added that Americans can also itemize deductions. “Medical expenses, property taxes, mortgage interest and charitable donations can further reduce your taxable income,” ChatGPT said. However, it failed to provide the qualifications necessary to actually itemize.
Live in a No-Income-Tax State
Lowering taxable burden isn’t just about reducing federal taxes. State taxes can also take a bite out of income. The AI provided a brief yet powerful way to accomplish this.
“States like Florida, Texas and Tennessee have no state income tax, which can result in massive long-term savings, especially for retirees and high earners,” ChatGPT said. Again, ChatGPT missed an opportunity to discuss other taxes Americans might incur in such states as property and sales taxes.
Start a Business or Side Hustle
Over half of Americans are working a side hustle, according to MarketWatch. Fortunately, many of these Americans may qualify for deductions tied to their side hustle or small business.
The AI was brief in its guidance. “Business owners get access to a range of deductions, home office, internet, travel and equipment. You can even deduct a portion of your car or rent if used for business purposes,” ChatGPT said. Unfortunately, the chatbot gave no guidance on how to qualify for such deductions. Speaking with a tax professional is the best way to determine how this might help you.
Strategically Use Legal Loopholes
The tax code avails various legal loopholes for Americans to reduce their taxable burden. ChatGPT highlighted two loopholes: using depreciation for real estate investors to help lower taxable income and backdoor Roth IRAs for high-income workers.
There was opportunity for the AI to expand this section as it didn’t include other loopholes, such as charitable contributions, lifetime learning credits, carried interest and more.
“You can’t avoid all taxes, but with smart planning, you can often legally owe very little or even nothing,” ChatGPT said. While this is true, what the AI provided was shallow. Every tax situation is unique. The chatbot provided a good, basic analysis of how to avoid paying taxes. It’s best not to take the insight as expert guidance. Speaking with a tax professional is best to review your particular situation and learn wise ways to lower your tax responsibility.
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