Every April 15 we have to pay the tax man. Or, if you’re lucky, receive a refund for overpaying him. But what if I told you there was a way to use the tax system to your advantage?

For example, let’s presume you have a few million dollars saved, but due to various expenses you can’t save more than $50,000 per year, which doesn’t meet the $100,000 benchmark required to reach your financial goals. It may seem that the only solution is to work harder at your job, which could help you earn $30,000 more. You may feel some solace with the fact that  you’ve at least lessened the gap between your benchmark and where you were. You place the additional $30K in savings.

But between state and federal taxes, it’s not hard to wind up in a 40 percent tax bracket. You just earned another $30,000, and 40 percent of that is $12,000, meaning you have to come up with $12,000 in extra cash just to pay taxes. You want to save at least the $30,000, but in order to pay your income taxes you would have to subtract $12,000 from the $30,000. Once you realize this, the question becomes, “How can I make up that missing $12,000?” It’s an endless cycle of catch up, with again the obvious answer being work harder. But you keep creating a taxable income.

However, you can make taxes work for you, instead of against you, if you utilize what we call the “Tax Saving Savings Effect.” By finding tax savings and then saving the investable cash that you find, you’ll be compounding your wealth.  But how do you find a legal way to keep your income from being taxed? One way is to contribute the extra earnings into a tax-deferred account, such as a pension plan. Sheltering those earnings in a pension plan converts them from a tax liability into a tax deduction. The $30,000 is now subtracted from your taxable income rather than added to it, reducing your taxes.  What’s more, the $30,000 will grow (and compound) in a tax-deferred way. See how that works? It’s a great way to invest in your future without working three times as hard to put the same amount of money in a savings account.

Master Your Cash Flow® has even more tips about using the tax system to your advantage. Visit tswealth.com for more information.