For many families, taxes are a backward-looking exercise. You gather your documents, send them to your preparer, and wait to find out what you owe. By then, the year is over, and many of the decisions that determined your tax bill have already been made.
A proactive review gives you a chance to influence that outcome while there is still time to act. Sometimes, the opportunity involves something as straightforward as redirecting money you already plan to save.
Here’s how that could work.
A hypothetical married couple divides their long-term savings between workplace retirement plans and a taxable brokerage account. They contribute enough to receive their full employer matches, then direct additional savings into the brokerage account.
During a year-end planning session, we review the $20,000 they intend to deposit into that account before December 31. They have adequate emergency reserves, and this money is intended for long-term needs.
The review reveals unused contribution room in their workplace retirement plans and an eligible Health Savings Account, or HSA. They also have sufficient remaining pay to increase their contributions through payroll.
What would happen if they redirected that $20,000?
Their projected tax return shows $90,000 of ordinary taxable income, after deductions, plus $30,000 in long-term capital gains. We compare their original plan with an alternative: contribute an additional $15,000 to their pretax workplace retirement plans and $5,000 to their HSA through an eligible employer cafeteria plan.
The most immediate benefit is straightforward. Those contributions lower their ordinary taxable income from $90,000 to $70,000. Because those dollars would otherwise be taxed at 12%, their ordinary federal income tax falls by $2,400.
That benefit is familiar. The next one is easier to overlook.
Long-term capital gains have their own tax rates, but the rate you pay depends on your overall taxable income. Think of gains as sitting on top of ordinary income. Lowering the ordinary-income layer can allow more gains to qualify for a lower rate.
For married couples filing jointly in 2026, the 0% long-term capital-gains rate extends to $98,900 of taxable income.
Before the contributions, the couple’s $90,000 of ordinary taxable income leaves room for $8,900 of gains at 0%. The remaining $21,100 is taxed at 15%, producing $3,165 in capital-gains tax.
After the contributions, $28,900 of their gains fits within the 0% range. Only $1,100 remains taxable at 15%, producing $165 in capital-gains tax.
That is another $3,000 saved. Their investment gains did not change. Redirecting their savings changed how those gains were taxed.
There is one more benefit. The $5,000 HSA contribution through the eligible employer arrangement also avoids employee Social Security and Medicare taxes. Assuming those wages would otherwise face the full combined 7.65% rate, that saves another $382.50.
The total current-year federal tax reduction is $5,782.50: $2,400 in ordinary income taxes, $3,000 in capital-gains taxes, and $382.50 in payroll taxes.
Nearly $5,800, from directing money they already intended to save into accounts suited to their goals.
Of course, those destinations matter beyond this year’s return. Pretax retirement contributions generally defer income taxes until withdrawal. They do not eliminate those taxes permanently. HSA withdrawals can be tax-free when used for qualified medical expenses; other withdrawals can trigger taxes and, depending on age, penalties.
The couple also gives up some flexibility compared with a brokerage account. That tradeoff needs to make sense for their financial plan.
Their experience illustrates why a tax bracket alone can be an incomplete measure of what a decision will save. A contribution that initially appeared to offer a 12% income-tax benefit also reduced taxes on investment gains, with additional payroll-tax savings from the HSA.
Year-end provides an opportunity to examine those interactions while payroll adjustments are still possible. Employer processing deadlines may arrive before December 31, even though some contributions, including eligible HSA contributions, can be made later.
At Hanover, we approach that review by coordinating your investments, cash flow, and long-term goals with your tax professional. Before the year closes, it is worth asking whether the money you already plan to save could accomplish more in a different account.
This hypothetical illustration uses 2026 federal rules, excludes state taxes, and assumes no other changes to credits, deductions, or benefits. Actual results depend on individual circumstances.