Tax optimization isn't tax evasion. These are legal strategies built into the tax code — often specifically to incentivize certain behaviors.

Tax-loss harvesting: selling investments at a loss to offset capital gains. Allows you to maintain market exposure by immediately buying a similar (not "substantially identical") investment. The loss reduces your tax bill while your portfolio exposure stays the same. Can offset up to $3,000 of ordinary income per year beyond capital gains.

Asset location: holding tax-inefficient investments (bonds, REITs) in tax-advantaged accounts (401(k), IRA) and tax-efficient investments (index funds with low turnover) in taxable accounts. The same portfolio generates different after-tax returns depending on WHICH account holds WHICH investment.

Roth conversion ladder: convert Traditional IRA to Roth IRA strategically in low-income years. Pay tax at a lower rate now to create tax-free withdrawals in retirement. Particularly powerful in early retirement before Social Security and RMDs begin.

Backdoor Roth IRA: for high earners above Roth income limits. Contribute to a Traditional IRA (non-deductible), then immediately convert to Roth. Legal, IRS-acknowledged strategy.

Mega Backdoor Roth: if your 401(k) plan allows after-tax contributions and in-plan Roth conversions, you can contribute up to $69,000 total (2024) to Roth-like accounts — far above the normal $23,000 limit. Not all plans allow this; check your plan documents.