- - I Asked a Tax Pro for Legal Ways To Reduce IRS Taxes: 8 Top Strategies

Lydia KibetFebruary 9, 2026 at 1:13 AM

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Hiding income from the IRS sounds shady. However, what most people are really looking for is to legally reduce the amount of tax they owe.

To clarify under what circumstances this is actually possible, we asked David A. Perez, a tax professional and founder of Tax Maverick, the best ways to legally hide your income from the IRS.

“Our goal isn’t to avoid or evade; it’s to shield the income,” he said. “We don’t want to hide anything. We don’t want to move it around. We want to find ways to maximize it.”

Congress has built legitimate tax breaks directly into the code, and understanding how to use them can save you tens of thousands, or even millions, in taxes. Below are the strategies Perez said he uses with clients to legally shield income from the IRS.

1. Solar Partnership Flips

One of the most effective ways to reduce taxes is by investing in large-scale solar projects. Instead of installing solar panels on your own home, investors can buy into a solar development partnership.

“You can now buy into a development that could allocate credits and depreciation to you,” Perez said. “So credits go dollar for dollar against your tax liability. And depreciation can also offset income.”

Depending on your percentage of ownership, you’ll receive a portion of that project’s depreciation in year one, and also get allocated solar tax credits that reduce your tax.

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2. Oil and Gas Working Interests

Most investments generate passive income that can’t offset your W-2 or business earnings. Oil and gas working interests are different. “This is what we call the active loophole.”

“Oil and gas is a very unique investment because the IRS code actually states in it that this can be treated as active in year one,” Perez said. “And intangible drilling costs, which are the majority of costs when you open a well, are going to be allocated to you. Now, most funds allocate 90%. In some cases you can get 100% depending on how you’re deferring it.”

After year one, Perez said you’ll be receiving royalties, which means you’ll be getting returns on your investment.

3. Real Estate Cost Segregation

If you own property, cost segregation can dramatically accelerate your depreciation deductions. The strategy involves breaking down your property into individual components so depreciation happens faster rather than over 27.5 years for residential, or 39 years for commercial.

“We do this all the time for our clients because cost segregation studies are pretty easy to do,” Perez noted. “Now, the challenge with cost segregation studies is that they only benefit investors whose primary activity is inside of real estate.”

4. Qualified Small Business Stock (QSBS)

Starting or investing in a C-Corporation opens the door to what Perez calls “the founder’s home run loophole.” Under Section 1202, if you establish a C corp and hold it for five years, you can avoid capital gains taxes on up to $15 million in gains (up from $10 million last year).

“This is a really good basis. So if you put in $100,000, you can also use your basis 10 times that. In most cases, though, it’s zero. So the max is 15,” he said. “In my case, I have a C corp, which is what the point is to get to $15 million and not have to pay capital gains tax.”

5. Transferable Tax Credits

The IRS now allows people to purchase solar tax credits from entities that can’t use them, including nonprofits like governmental agencies and school districts that put solar on their buildings. This can lower your tax bill, whether you earn them or buy them.

“On average, it’s about 90 cents to the dollar,” Perez noted. “That would give you a dollar deduction against your tax liability. But you can find cheaper and other off-market sites.”

6. Opportunity Zones

Opportunity zones let you defer capital gains by rolling them into designated development funds. These funds open in HUD-designated low-income areas that need development to attract investors.

“The only problem with opportunity zones is they expire next year,” Perez pointed out. “We have a feeling that Congress will extend it. But what you do is take the gain from a capital gain, and roll it into a fund.” You can then “defer the capital gains through the fund and get a portion of that tax-free.”

7. Conservation Easement

This strategy involves purchasing land with development potential, getting it appraised at its highest-use value, and then donating it to a nonprofit with a conservation easement.

“For example, I buy a property for a million dollars. But if I were to put apartments on it or commercial property, it’d be worth $5 million,” Perez explained. “I could take that $5 million as a deduction because I’m going to donate the land to a nonprofit, and that means that nobody will ever develop that land. So, I get the deduction and conserve land.”

8. Buy, Borrow, Die

Perez called this his favorite strategy. “People accumulate assets over their lifetime. Instead of selling, you can borrow against it and live off of the proceeds from the borrowed money.”

The “Buy, Borrow, Die” strategy works like this: Build wealth in appreciating assets like real estate, borrow against them to fund your lifestyle, and when you die, your heirs inherit everything with a stepped-up basis, meaning no capital gains taxes on the appreciation.

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Source: “AOL Money”