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If you’re a high-income earner, you already know taxes can quietly eat into your wealth. But what if you could keep more of what you earn, without giving up the lifestyle you’ve built? That’s precisely what innovative tax strategies help you do.
At BetterWealth, we believe in intentional financial planning, and that means going beyond surface-level advice. Whether you’re growing a business, managing significant investments, or just looking to protect what you’ve built, there are fundamental, legal strategies that can reduce your tax burden and set you up for long-term success.
In this blog, we’ll break down simple, powerful ways to save on taxes, not with loopholes, but with proven tactics designed to work with your income, your goals, and your lifestyle.
Here’s what you’ll walk away with:
Let’s start by clearing up one of the most significant sources of confusion: tax brackets.
Knowing how tax brackets work (and clearing up a few common myths) helps you make more intelligent choices with your income. This is especially true if you earn a lot. Honestly, it’s easier to plan with confidence when you see how the system actually works.
Tax brackets are just ranges of income that get taxed at different rates. When your income increases, only the portion in the higher bracket pays the higher rate. For instance, if the 24% bracket starts at $95,375, only the income above that amount (up to the next limit) is taxed at 24%, not your entire paycheck.
High earners face the top brackets, sometimes above 35%. But you never lose all your income to taxes in one fell swoop. It’s more like climbing stairs; each step is taxed differently.
Plus, there’s stuff like the 3.8% tax on investment income if you make over $250,000 (joint) or $200,000 (single). Knowing this lets you time income, investments, and deductions to minimize taxes legally.
Taxes can be tricky, and a few common myths often cause unnecessary confusion.
Knowing these basics helps you make better financial decisions and keep more of what you earn.
Putting more into your retirement accounts can save you a lot on taxes. There are various ways to boost your savings, including different 401(k) options, IRA moves, and even large pension plans. Each has its own flavor, so you can pick what fits your situation.
A Traditional 401(k) uses pre-tax dollars, which lowers your taxable income immediately so you'll pay less tax this year, but you’ll pay income tax when you withdraw in retirement.
A Roth 401(k) flips it: you contribute after-tax dollars, so there’s no instant tax break, but withdrawals in retirement (including gains) are tax-free.
If you’re a high earner and your employer offers both, maxing out both could help balance taxes now and later. For 2025, you can contribute up to $22,500, plus an additional $7,500 if you’re 50 or older.
If your income is too high for a direct Roth IRA contribution, a Backdoor Roth can be a clever workaround.
A Backdoor Roth IRA can unlock tax-free growth, but only if done strategically and correctly.
A Defined Benefit Plan is like an old-school pension, but if you’re a business owner or high-income earner, it’s a way to put in much more than a 401(k) allows. You agree to a fixed monthly benefit at retirement, and your contributions grow tax-deferred.
You can often contribute tens of thousands a year, sometimes way more than other accounts. Great if you want to speed up retirement savings and cut your taxable income quickly. Setting one up is more involved, so you’ll want an expert to tailor it to your business and goals.
Tax-advantaged investments help you keep more of your income as your wealth grows. These options reduce your tax bill and provide opportunities to invest with lower tax risk. Knowing how they work is key to using them well.
Municipal bonds, or “munis,” mean you’re lending money to local governments. The interest you earn is usually free from federal income tax. Many states also exempt you from taxation if you buy bonds from your home state. For high earners, that’s a nice perk.
Municipal funds are used for things like schools or roads, so they’re usually pretty safe. You can buy general obligation bonds (backed by taxing power) or revenue bonds (paid from specific project income). Rates may be lower than those of other bonds, but the tax benefits can offset the difference.
Quick points:
HSAs let you stash money tax-free for medical costs if you have a high-deductible health plan. Contributions reduce your taxable income, grow tax-free, and withdrawals for qualified medical expenses are tax-free, too. That’s a rare triple tax benefit.
You can invest HSA funds just as you would in retirement accounts. So your money can grow over time, making it an innovative tax-saving tool. After 65, you can use HSA funds for anything, just pay income tax if it’s not for medical stuff.
Benefits:
Using HSAs wisely can significantly reduce your tax bill while preparing for healthcare costs.
You can lower your taxes now by pushing some income into the future. Two common ways: special compensation plans and equity rewards. Both delay when you pay taxes on your earnings.
Deferred compensation plans let you set aside part of your salary or bonus to get paid out later, often after you retire. That way, you delay paying income tax until you actually receive the money, maybe when you’re in a lower tax bracket.
There are qualified and non-qualified plans. Qualified ones have strict rules and limits. Non-qualified plans are more flexible but depend on your company’s ability to pay you later.
You’re trusting your company will be there when it’s time to collect. Selecting the right plan can enhance your tax savings and help streamline your retirement planning.
Stock options give you the right to buy company shares later at a set price. You don’t pay taxes when you get them, only when you exercise or sell.
Restricted stock units (RSUs) and stock grants work differently. RSUs become taxable as ordinary income when they vest. You can time selling or exercising to manage when you face the taxes.
These strategies enable you to control when to recognize income and potentially reduce your tax liability. Working with BetterWealth can help you utilize these tools effectively for long-term wealth management.
Giving to charity can lower your taxable income and make a difference. The right tools boost your tax savings while you support causes you care about, three innovative ways: donor-advised funds, charitable remainder trusts, and gifting appreciated assets.
A donor-advised fund (DAF) is like a personal charitable savings account. Invest money or assets, receive an immediate tax deduction, and decide later where the funds are allocated. DAFs allow you to time donations for maximum tax benefit in a high-income year.
You can invest the fund’s assets, potentially growing your giving over time. It’s way less paperwork, just one administrator, not a tangle of charities. You keep control, dodge the hassle. This option is ideal if you want a flexible, tax-smart way to give without having to choose a charity immediately.
A charitable remainder trust (CRT) lets you donate assets and still get income from them during your life. When you pass, what’s left goes to a charity you choose.
This setup reduces your taxable estate and provides a steady income. You get a tax deduction now for the part that’ll eventually go to charity. If you put valuable assets in the trust, you skip immediate capital gains taxes.
CRTs work if you want to support charity, cut taxes, and still need income. They take some setup, but can be powerful for high earners with long-term plans.
Instead of cash, consider giving stocks or property that have appreciated. You avoid capital gains tax on the sale. You still get a deduction for the full market value. That boosts your tax benefit and removes the asset from your taxable estate.
If you’ve held investments for a long time and want to give and save on taxes, this is an efficient approach. BetterWealth often recommends this approach for optimal tax outcomes and lasting impact.
Choosing the proper business structure allows you to retain more income and reduce your tax bill. How income flows and gets taxed at both the business and personal levels really matters. Here’s how Pass-Through Entities and S Corporations can help.
Pass-through entities (partnerships, LLCs, S corporations) send business income straight to your personal tax return. You skip the double taxation that hits C corporations.
You pay taxes on your share of profits at your personal rate. Often, you can deduct business losses on your individual return, lowering your taxable income in the right situations.
A big perk: The Qualified Business Income (QBI) deduction, which lets you deduct up to 20% of income from pass-through entities. This can make a real dent in your tax bill, though there are rules.
An S Corporation offers a brilliant mix of tax efficiency and personal protection for business owners.
If your business earns steady profits beyond your salary, forming an S Corporation can be a smart, tax-savvy move.
Real estate gives you ways to reduce taxes while building wealth. You can defer capital gains and speed up depreciation to save money now and boost cash flow later. These moves take some planning, but can be seriously powerful.
A 1031 exchange lets you sell an investment property and buy another without paying capital gains tax right away. You defer the tax until you eventually sell the new property. To qualify, the new property has to be of equal or greater value, and you’ve got to stick to some pretty strict timelines, like identifying replacement properties within 45 days and closing the deal in 180 days.
This approach keeps more money working for you instead of handing it over to the IRS upfront, which is especially helpful if your income nudges you into higher tax brackets. Most people work with a specialized intermediary to keep everything above board with the IRS.
Cost segregation breaks down your property into its components (such as walls, flooring, and equipment) to accelerate depreciation. Instead of spreading depreciation over 27.5 or 39 years, you assign shorter lifespans, 5, 7, or 15 years, to specific parts. That means bigger depreciation deductions more quickly.
Accelerating deductions cuts your taxable income and, in turn, your current tax bill. If you own commercial or rental property and want to increase your cash flow, this can be a game-changer. You’ll want a qualified engineer or tax professional for this, as the IRS expects detailed studies, not just estimates.
Losing money on some investments isn’t always a bad thing. You can use those losses to offset gains and shrink your overall tax bill. By selling assets that have lost value, you can balance out the taxes owed on your winners. This allows you to reduce your taxable income throughout the year, which is quite clever, honestly.
When you sell an investment for less than you paid, you’ve got a capital loss. You can use these losses to reduce your taxes. If your losses outpace your gains, you can even deduct up to $3,000 from your regular income. Any leftover losses? Roll them forward to future years.
Keep a close eye on your cost basis, that’s what you originally paid. That way, you know exactly how much loss you’re claiming. With a bit of timing and planning, you can control your tax bill and prep for future gains.
Capital gains show up when you sell something for more than you bought it. They’re taxable, but you can use your losses to wipe out some or all of those gains, tax loss harvesting in action.
First, use your losses to cancel out gains from assets you sold this year. If you’ve got more losses than gains, you can use up to $3,000 to reduce your other income.
High earners, especially those who are self-employed, can use this to manage their taxable income and keep more of what they earn. If you’re not sure about timing or which sales to make, a tax pro or tools from BetterWealth can help you figure it out.
Maintaining your wealth for your family requires careful planning. You’ll want to use innovative tools to minimize taxes and protect assets. Legal structures, such as trusts, can keep your money out of probate and reduce estate taxes.
An irrevocable trust takes assets out of your taxable estate. Once you put property or money in, it’s not really yours anymore, so estate taxes shrink. Because the trust is permanent, you can’t just change your mind later. This protects your assets from creditors and lawsuits.
You get to choose who receives the assets, and they’ll be distributed according to your instructions. Probate? Not an issue here, your heirs avoid the hassle and expense. Irrevocable trusts are powerful, but you really need an expert’s help. The folks at BetterWealth can ensure the trust aligns with your goals and meets your family’s needs.
A Qualified Personal Residence Trust (QPRT) is a special trust for your main home or a vacation place. You put your house into the trust, but keep the right to live there for a set number of years. After that, the house passes to your chosen beneficiaries, typically your children or grandchildren. This move lowers the home’s estate tax value, which can result in significant savings.
You can still live there while reducing future estate taxes. The longer the trust lasts, the larger the tax break. QPRTs work best if you expect your home’s value to climb or you want to pass real estate on efficiently. If you’re curious, we can help establish these trusts as part of your comprehensive estate plan.
Earning a high income? Tax rules can get complicated fast. One mistake people make is skipping the annual gift tax exclusion. Using it helps shrink your taxable estate without triggering gift taxes. Miss it, and you’re leaving a simple tax-saving move on the table.
Another common slip-up: waiting too long to plan for inheritance and estate taxes. Estate taxes can be particularly burdensome if you don’t set things up correctly. Even basic steps like trusts or thoughtful gifting can keep more money in the family.
Not all life insurance benefits are tax-free, either. Some policies, especially those with excessive coverage, have their quirks. BetterWealth’s And Asset approach can help you achieve growth and tax benefits while maintaining control of your cash.
And please, keep good records. Messy paperwork on gifts or investments can turn into a headache if the IRS comes knocking. Staying organized now saves you trouble and money in the long run.
Common Tax Pitfalls
How to Avoid Them
Ignoring gift tax limits
Use the annual gift tax exclusion fully
Late estate planning
Plan early with trusts and gifting
Misunderstanding life insurance tax rules
Learn how overfunded policies work with tax
Poor record keeping
Keep detailed, updated tax and financial records
Avoiding these mistakes puts you ahead.
Managing tax liability with a high income isn’t easy, but you can use deductions, investments, and business strategies to help. Real estate and smart side hustles can cut your taxable income if you plan it right. Self-employed folks get a few extra ways to legally lower their tax bills legally, too.
You can deduct mortgage interest, state and local taxes, and charitable donations. Retirement account contributions, like a 401(k) or IRA, also lower your taxable income. Health savings accounts (HSAs) and some education expenses might give you extra deductions. It’s worth tracking every eligible expense.
Real estate offers deductions for depreciation and mortgage interest. These can offset rental income and lower your taxable amount overall. A 1031 exchange lets you defer taxes by swapping one property for another, so you don’t pay capital gains tax right away.
Self-employed? Deduct business expenses like equipment, office space, and travel. You can also put more into retirement accounts, like SEP IRAs with higher limits. Health insurance premiums are deductible, too. Track every business cost; it adds up.
A side business allows you to write off expenses such as a home office, supplies, and mileage. These costs can offset your business income and lower your tax bill. Just make sure your side gig is legit and keep good records. It pays off when you work with a tax pro to maximize your savings.
Absolutely. Charitable donations are tax-deductible if you itemize your deductions. Large gifts, especially appreciated assets like stocks, can significantly reduce your taxable income. Donor-advised funds are a smart way to manage giving and maximize tax benefits. Remember to keep receipts and records for all donations.
Trusts and estate planning can shield wealth from hefty estate taxes. Some folks lean into overfunded whole life insurance, like The And Asset® from BetterWealth, for its tax perks and the flexibility it brings while you're still around. Tax deferral through retirement accounts? That's another classic move. Investing in tax-efficient vehicles can make a real difference, too.
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