How do I reduce 'System Data' usage on my iMac and optimize performance?

There are no fixed and set steps to reduce /System/Volume/Data

This Volume became part of the Operating System when you first setup this computer with your User Account

As such, whatever is currently in your Home Folder ( User Account ) is what you have direct control over

The /System/Volume/ Data is a collection  of files which include:

• System temporary files

• macOS system folders

• Archives and disk images (.zip, .iso, etc. - often found in the Downloads folder)

• Personal user data

• iOS Backups

• Files from the user’s library (Application Support, iCloud files, screensavers, etc.)

• Cache files

• Fonts, plugins, extensions

• Other files that are not recognized by a Spotlight search

• Media files that cannot be classified by Spotlight as a media file because they are located inside of a package

•Time Machine Backup Snapshots that have not been transferred to the TM Backup Drive 

• Was there or is there another user account currently or previous used on this computer ?

Has the account been removed ?

Has the removed user account ’s Home Folder been removed ?

• Delete a user or group on Mac

They can be located anywhere on your hard drive. The files that you have control over are located in the Documents, Downloads, Pictures, Music and Movies folders.  You can use either of these two free apps, GrandPerspective , to find the largest files on your drive so you can determine if they can be deleted or moved to an external HD for storage.  

Not much you can do with that category. (Apple controls that) You can look at disk utilities and see if you have any snapshots under your data volume that can be deleted. You could also boot into recovery, erase and reload all which usually lowers that number. You can search this site for discussions on this same topic by others.