Tax Planning Tips for High Earners

Strategies to Minimize Liability & Maximize Efficiency

If you’re earning $250,000 or more annually, your tax planning strategy deserves thoughtful, proactive attention. While we are not CPAs or tax attorneys, we regularly collaborate with professionals in those fields to guide our clients through wealth preservation, succession planning, and tax-smart charitable giving.

Below are high-level strategies designed to minimize tax liability, optimize deferrals, and enhance long-term financial efficiency.

Strategic Deferrals & Tax Shelters

Maximize Tax-Deferred Accounts

401(k): Contribute up to $23,000 (employee) + $46,000 (employer) in 2025. Solo 401(k) for the self-employed.
Backdoor Roth IRA: Perfect for high earners above Roth income limits.
Mega Backdoor Roth: If your 401(k) allows, contribute post-tax and convert.
SEP-IRA: Self-employed? Contribute up to $70,000 or 25% of compensation.
Defined Benefit Pension Plan: For business owners—these allow significant contributions for future retirement.

Health Savings Account (HSA)

Triple-tax advantage: pre-tax contribution, tax-free growth, and tax-free withdrawals.
2025 limits: $4,300 (individual) / $8,550 (family) + $1,000 catch-up for those 55+.

Deferred Compensation Plans

Offered by some employers; defer income until retirement when you’re in a lower tax bracket.

Entity Structure & Income Shifting

S-Corp Optimization

Split income between salary and distributions to reduce self-employment tax.
Salary must be reasonable to pass IRS scrutiny.

Family Income Splitting

Hire your children for legitimate work—contribute to a custodial Roth IRA for them.

Trust Strategies

Consider Grantor Trusts, SLATs, or Charitable Remainder Trusts to boost tax efficiency.

Deductions, Credits & Itemization

Bunching Deductions

Use Donor-Advised Funds (DAFs) to front-load giving in high-income years.

Mortgage Interest + SALT Planning

With the $10,000 SALT cap, consider timing property tax payments.
Review with your CPA, especially if you’re near AMT thresholds.

Charitable Gifting of Appreciated Assets

Donate long-term appreciated stock or funds directly—avoid capital gains and deduct full market value.

Investment Tax Strategy

Tax-Loss Harvesting

Offset gains with realized losses—especially valuable in volatile markets.

Asset Location

Place tax-inefficient assets (bonds, REITs) in tax-deferred accounts.
Reserve taxable accounts for long-term equities and ETFs.

Qualified Opportunity Zone (QOZ) Investments

Defer capital gains, reduce basis, and pay zero tax on gains if held 10+ years.

Audit-Proofing & Documentation

Track Expenses Carefully

Especially for real estate, consulting, or side businesses. Maintain detailed records and receipts.

Annual Reviews with a Tax Pro

Income structures change. So do IRS rules. Revisit your strategy every year with a professional.

Final Thoughts:
These strategies are just the beginning. In deeper conversations—with both your financial advisor and your CPA—you can tailor a plan that reduces your tax burden and aligns with your long-term goals.