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The 2026
Three-League
Tax Reduction
Checklist

Legitimate strategies, sorted by how much structure each takes to do right … and the Prison League schemes you need to avoid.

Edward Collins,
JD, CFP®, AAMS, RFC
17
Minor League
15
Major League
12
Prison League

Reflects federal law as of October 1, 2026.

Educational information only … not individualized tax advice.

A note from Edward

Here’s what I promised.

If you told me about your tax bill, this is the Checklist I said I’d send. If you found it on your own, it’s yours too. Use it to see what’s already working for you, what’s missing, and what you should never touch.

Start with Step Zero. Then go through the Minor League and ask of every row: yes, not sure, or no? Every not sure is a question for your tax professional before December 31.

Then the Major League. That’s where structure changes the result … and where the math gets personal, which is exactly what I walk through in the Workshop On Tax Reduction.

Then read the Prison League twice. Bad tax advice sounds smart until someone has to defend it.

Bye for now,
Edward
Step Zero

Build the Fortress.

Tax reduction is the second pillar of the Real Wealth Matrix™, not the first. Build the fortress, keep more of every dollar that comes into it, give those dollars a job, and make sure they end up with the people and the causes you care about. This Checklist is pillar two.

A Holding Company / Operating Company structure separates where you can get sued from where value lives.

Holding Company
Owns what’s worth protecting.
Operating Company
Does business with the public … and is where you can get sued.

It isn’t a tax strategy, and it won’t lower your bill by itself. But several Major League strategies sit on it … family LLC gifting, grantor trust planning, real estate held apart from the business … and it decides whether a strategy holds up when someone asks.

Any fee between your own companies has to pay for real services, priced at arm’s length and booked the same way on both sides.

Strategy without structure is friction.

The League Map

Three leagues, one order.

01
Minor League
17
Table stakes. Most need only your CPA.
02
Major League
15
Structure required. Where the result changes.
03
Prison League
12
Schemes, not strategies. Nothing here gets a yes.

Inside the first two leagues, rows run from what your CPA can do alone to what takes a team. No savings estimates here … by design. What a strategy is worth depends entirely on your facts.

The small line above each name says what kind of result to expect, and flags the rows that need extra care.

Permanent
The tax never applies.
Deferral
The tax is postponed, and usually comes back later.
Income shift
Income moves to a lower bracket.
Credit
A dollar-for-dollar reduction.
Estate
Growth moves out of your taxable estate.
Tax-free growth
You pay now so qualified withdrawals later are tax-free.
Timing
When income lands changes what it costs.
Draws exam attention
My judgment of how likely a row is to be questioned, not an IRS score.
Disclosure form likely
A Form 8886 may be required.

01·17 strategies

Minor League

Table stakes.

Foundational, defensible and widely applicable. Rarely dramatic on their own … but missing them means the household isn’t architected yet.

Much of this league has to be in place by December 31.
Your CPA can put these in place
1.01
·
Permanent

Accountable plan

Repaid business costs are deductible to the company and tax-free to you.

Owners who work for their own S-corp or C-corp and pay business costs personally.

1.02
·
Permanent

HSA with a qualifying high-deductible plan

Deductible going in, tax-free growth, tax-free out for qualified medical costs.

Households covered by a qualifying high-deductible health plan.

1.03
·
Permanent

Self-employed health insurance, Section 162(l)

Deducts your premiums without itemizing.

Self-employed owners and more-than-2% S-corp owners.

1.04
·
Permanent
·
Draws exam attention

Augusta Rule, Section 280A(g)

Your company deducts the rent it pays you, and you receive it tax-free.

Owners whose S-corp, C-corp or partnership holds real business meetings in their home.

1.05
·
Income shift

Hiring your children

Shifts income from your bracket to your child’s, which is usually much lower.

Children who do real work in the business.

1.06
·
Permanent

Dependent care assistance program

The business pays dependent care costs as a tax-free benefit.

Businesses where rank-and-file employees use the benefit.

1.07
·
Tax-free growth

Backdoor and mega-backdoor Roth

Roth savings above the income limits, with tax-free qualified withdrawals.

Households above the direct Roth IRA income limits.

1.08
·
Tax-free growth

Roth conversion in a lower-income year

Pays the tax in a low year, so future qualified growth comes out tax-free.

A year when income dips … a sale year, a gap year, a big-deduction year.

1.09
·
Deferral

Routine Section 179 and bonus depreciation

Deducts qualifying purchases in the year they’re placed in service.

Businesses buying equipment, vehicles or other qualifying property.

1.10
·
Permanent

Donor-advised fund bunching with appreciated stock

Deducts long-held appreciated stock at its value, and the gain is never taxed.

Households that give to charity every year.

1.11
·
Permanent
·
Estate

529 front-loading and annual exclusion gifts

Gifts move value out of your estate, and 529 growth can be tax-free.

Families saving for education or moving value to the next generation.

1.12
·
Deferral

Tax-loss harvesting

Takes losses to offset gains you’ve realized elsewhere.

Households with taxable investment accounts.

1.13
·
Permanent

Pass-through entity tax election

Moves state income tax to the business, outside the SALT cap.

Owners of pass-through businesses in states with an income tax and an elective pass-through entity tax.

1.14
·
Timing

SALT phase-out management

Times income so less of it lands in the band where the SALT cap shrinks.

Itemizers whose state and local taxes exceed the reduced cap, with MAGI between $505,000 and $606,333.

1.15
·
Permanent

Section 199A deduction, modeled with salary

Deducts part of the qualified income your pass-through business earns.

Pass-through owners; service businesses lose it at higher incomes.

Adds one outside specialist
1.16
·
Permanent

S-corp election with defensible reasonable compensation

Payroll tax applies to a reasonable salary, not to distributions.

Some owners, not all. For some it raises the bill.

1.17
·
Deferral

401(k) with employer profit sharing

Pre-tax dollars from you and the business, taxed only when withdrawn.

Owners with steady profits.

02·15 strategies

Major League

Structure required.

Legitimate when the facts support them and the structure is real. More difficult to execute, and they pack a significant punch when done correctly. A few draw more exam attention, and they’re flagged.

Eleven of these fifteen rows rely on deferral. Deferral becomes wealth only when the dollars it frees up are put to work.

Tax savings never goes to a consumption account. It goes to an acquisition account.

Adds one outside specialist
2.01
·
Deferral

Section 1031 like-kind exchange

Rolls the gain on one property into the next, instead of paying the tax now.

Real estate investors selling one property to buy another.

2.02
·
Deferral

Short-term rental losses against active income

Rental losses, often from depreciation, can offset wages and business income.

Rentals averaging 7-day stays or less, where you materially participate.

2.03
·
Credit
·
Draws exam attention

Section 41 research credit

A credit worth a share of qualified research spending, taken dollar for dollar off the tax.

Businesses developing or improving products, processes or software.

2.04
·
Deferral

Installment sale, Section 453

Spreads the gain over the years the buyer pays you.

Sellers willing to carry a note from the buyer.

2.05
·
Deferral
·
Permanent

Qualified Opportunity Fund

Defers reinvested capital gains, and growth held 10 years can be tax-free.

Investors with capital gains to reinvest. Rules change for investments from 2027.

2.06
·
Deferral

Oil and gas working interest (intangible drilling costs)

Deducts intangible drilling costs up front, instead of over time.

Investors who accept unlimited personal liability.

Several specialists, multi-year
2.07
·
Deferral

Cash balance plan stacked on a 401(k)

A pension-style plan allowing deductible contributions far above a 401(k).

Owners with steady profits who want deductions well beyond a 401(k), and enough W-2 pay to support them.

2.08
·
Deferral
·
Draws exam attention

Cost segregation with bonus depreciation

Depreciates parts of a building faster, pulling deductions forward.

Real estate professionals, or short-term rentals with material participation.

2.09
·
Deferral

Section 168(n) qualified production property

A full first-year deduction for qualifying production buildings.

Manufacturers, producers and refiners building facilities they use themselves.

2.10
·
Permanent
·
Draws exam attention

QSBS, Section 1202 C-corporation design

Excludes the gain on qualifying stock from tax when you sell.

Founders building a C-corporation to sell.

2.11
·
Deferral

ESOP sale, Section 1042

Defers the gain when the sale proceeds go into qualified replacement property.

C-corporation owners selling to their employees.

2.12
·
Estate
·
Draws exam attention

Family LLC gifting with valuation discounts

Gifts business interests at a discount, stretching your exemption.

Families headed past the $15 million exemption, or facing a state estate tax.

2.13
·
Estate

Grantor trust planning: GRATs, SLATs and sales to an IDGT

Moves future growth out of your estate while you pay the trust’s income tax.

The same families, freezing the value of fast-growing assets.

2.14
·
Deferral
·
Permanent

Charitable remainder trust

The trust sells without immediate tax, pays you income, leaves the rest to charity.

Charitably inclined owners of a large, appreciated asset ahead of a sale.

2.15
·
Deferral
·
Draws exam attention
·
Disclosure form likely

Risk-based captive insurance, Section 831(b)

Deducts arm’s-length premiums your business pays its own insurer.

Real, hard-to-place risk. The IRS reports winning every micro-captive case decided on the merits since 2017.

03·12 schemes

Prison League

Schemes, not strategies.

Tax evasion in a costume, usually sold on social media as a legal way to pay nothing. There is no such thing.

Tax avoidance and tax evasion are two very different things.

The legitimacy test

Two questions.

1

Did Congress write this benefit into the Code … and are you using it the way Congress intended?

2

Apart from the tax result, does it meaningfully change your economic position … and do you have a substantial business or investment reason to do it?

The second question is the economic substance test. Where it applies, the law requires both halves of it. The Prison League fails both questions … and usually fails on simpler grounds too: the owner never gave up control, the expense was personal, or the numbers were invented.

For every row in this league

When the IRS finds one of these, the benefit is disallowed, with back tax, interest and penalties that commonly run from 20% to 75% of the underpayment … and some rows carry more.

Anyone who uses one of these willfully to evade tax commits a federal felony.

Some rows also carry a documented status

ListedNamed by Treasury regulation now in force. Form 8886 required.

ReportableA transaction of interest. Form 8886 required.

ProsecutedIRS or Justice Department materials on this type of arrangement cite a criminal conviction of a user or promoter.

Schemes to avoid
3.01
·
Prosecuted

Abusive trust arrangements

“Move the business, its equipment or the home into trusts so income and self-employment tax disappear.”

The owner still controls everything, so courts tax it to the owner as a sham, assigned income or a grantor trust.

Legitimate version: An LLC or S-corp that reports its income properly.

3.02
·
Prosecuted

Layered trust package

“Stack trusts so income flows layer to layer, ending in a ‘charitable’ or foreign trust where almost nothing is taxed.”

Substance over form taxes it all to the owner.

Legitimate version: A properly drafted non-grantor trust with an independent trustee.

3.03
·
Prosecuted

Your own “charity” paying family costs

“Run household, education and recreation costs through a charitable trust or family foundation you control, and deduct them.”

Often no exemption letter, and no deduction when the donor benefits.

Legitimate version: A donor-advised fund, a charitable remainder trust, or a properly governed private foundation.

3.04

Non-grantor, irrevocable, complex, discretionary, spendthrift trust under Section 643

“A trust can exclude capital gains from income by reading Section 643 out of context.”

The IRS says it misapplies the distributable-net-income rules.

Legitimate version: A properly drafted non-grantor trust that pays tax at trust rates.

3.05
·
Listed

Monetized charitable remainder annuity trust

“Fund the trust, sell the asset, buy an annuity, and treat the payouts as mostly tax-free.”

The payouts are taxed under the trust’s four-tier rules, so the gain comes out as ordinary income and capital gain.

Legitimate version: A charitable remainder trust taxed under the four-tier rules.

3.06
·
Listed
·
Prosecuted

Syndicated conservation easements

“Invest a dollar, deduct several.”

Congress now denies the entire deduction when a partnership easement exceeds 2.5 times the partners’ basis.

Legitimate version: A single-owner easement with a qualified appraisal.

3.07
·
Reportable

Abusive micro-captive insurance

“Deduct premiums paid to your own insurance company for risks that will never happen.”

The “insurance” isn’t insurance: implausible risks, premiums far above arm’s-length prices.

Legitimate version: A risk-based captive with real claims and priced premiums (Major League).

3.08

Monetized installment sales

“Get the cash now and defer the gain for decades.”

An escrow-backed or unsecured “loan” is treated as payment, so the gain is taxed in the year of sale.

Legitimate version: A properly structured Section 453 installment sale.

3.09

Zero or token S-corp salary

“Pay yourself little or nothing in salary and take everything as distributions.”

The IRS can treat distributions as wages, with payroll tax, interest and penalties.

Legitimate version: An S-corp with defensible reasonable compensation.

3.10

Personal costs run through the business

“Family travel, a home ‘rented’ to your company with no meeting, children paid for no work, fees between your own companies with nothing behind them.”

Personal expenses aren’t deductible.

Legitimate version: An accountable plan, the Augusta Rule with records, hiring your children for real work.

3.11

Offshore and treaty schemes

“Foreign pensions, nominee entities and foreign trusts put assets beyond the IRS’s reach.”

The IRS says these claims are not true.

Legitimate version: Fully reported foreign accounts and entities.

3.12

Fabricated credits, withholding and deductions

“Refundable credits or withholding you never earned … a Form 2439 credit, a ‘self-employment tax credit,’ overstated withholding, inflated non-cash gifts.”

The IRS warns of significant civil and criminal penalties, plus a 20% penalty on excessive refund claims.

No legitimate counterpart. Don’t do it.

Keep this.

Save it where you’ll find it in December. Take every not sure to your tax professional before December 31 … most Minor League rows need only your CPA.

This Checklist shows you the moves. The Workshop shows you how they fit together. In the Workshop On Tax Reduction I walk through three composite households, line by line … the pairings, the order and the math a checklist can’t hold.

Bye for now,

Edward
Edward Collins, JD, CFP®, AAMS, RFC
Founder & Generational Wealth Creation Architect
Uplevel By Design, LLC
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Important Disclosure

Who wrote this, and why you have it. This Checklist was written by Edward Collins, JD, CFP®, AAMS, RFC, and is published by Uplevel By Design, LLC (with its affiliated companies, the “Company”). It is a resource of Uplevel By Design, LLC, provided to people who asked to receive it or who find it on the Company’s website, and shareable under the license below.

Educational information only. It is general information written for a national audience … not individualized tax, legal, accounting or investment advice, and not a substitute for the judgment of your own licensed professionals. Nothing in it was prepared for your facts. It does not account for your income, your entities, your filings, your state or your family, so it cannot be relied on to avoid penalties.

No professional relationship. Receiving, reading or using this Checklist creates no attorney-client, accountant-client, advisory or fiduciary relationship of any kind. The Company does not represent you as your attorney and does not practice law. Edward’s credentials inform the education in this Checklist. They do not make it personalized advice for your situation.

Federal law, at a point in time. This Checklist reflects federal law as of the date on its cover. Law changes, some rules cited here are in active litigation, and state rules can differ from federal treatment. The 2026 figures are the federal amounts published for that year; every example is illustrative. The structure ratings and flags are the author’s judgment … not IRS standards, and not predictions about your return. The Workshop households it mentions are composites.

Work from the current edition. This is the 2026 edition. Figures and rules change every year, so a later tax year needs a later edition.

Not a recommendation. Rows that mention an investment or insurance arrangement describe its tax treatment only. Nothing here is an offer or a recommendation to buy any security, insurance product or investment.

Before you act. Have your own licensed tax professional … and, where an entity, a trust or a transfer is involved, your own attorney … review your circumstances and confirm the right steps. If a matter is already contested … an IRS examination, a notice, a pending dispute … take it directly to licensed counsel. We can promise process, not outcomes.

About the Prison League. Those rows describe arrangement types the IRS has publicly identified as abusive or reportable. They refer to no particular person, firm or product.

Your license. You may keep, use and forward this Checklist in its complete, unmodified form. You may not resell it, republish it as your own, excerpt it in a way that removes this Important Disclosure, or distribute a modified version. It is provided “as is,” without warranty of any kind, express or implied. To the fullest extent permitted by law, the Company disclaims all liability for any loss arising from use of, or reliance on, this material.

This document is for educational purposes only. It does not constitute tax, legal, or investment advice. Consult your qualified professional for guidance specific to your situation.

© 2026 Uplevel By Design, LLC. All Rights Reserved.