What does advanced tax planning actually look like for high earners?
Posted by Forsaken_Trash_4950@reddit | AskAnAmerican | View on Reddit | 49 comments
I keep hearing people mention advanced tax planning, but no one really explains what that actually means.
High W2 income here. I’m already maxing out my 401k, HSA, and covering all the usual basics, but it feels like most advice ends there.
For higher earners, what strategies or moves actually made a meaningful difference for you?
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musing_codger@reddit
One you didn't mention was Megabackdoor Roth. It's an extremely valuable tax break for high W2 earners.
OpposumMyPossum@reddit
What's that? Are you joshing?
musing_codger@reddit
No. It’s one of the best deals out there for high earners, but not everyone can do it—your 401(k) plan has to support it.
Most people think the 401(k) contribution limit is just the employee deferral ($24.5k in 2026). That’s only for pre-tax or Roth contributions. The total limit—including employer contributions—is much higher ($72k in 2026).
So if you put in the max and your employer matches, there may still be room under that total limit. Some plans let you fill that gap with after-tax contributions.
Normally that’s not very attractive. That is, unless your plan allows the mega backdoor Roth. In that case, you can convert those after-tax contributions to Roth (either in-plan or via rollover). That effectively lets you make very large Roth contributions.
You do need the right plan features (after-tax contributions plus in-service withdrawals or in-plan conversions), which many plans don’t offer.
If you can do it, it’s incredibly powerful, especially for early retirement, since Roth withdrawals don’t count toward taxable income for things like ACA subsidies.
It’s so good it almost feels like cheating.
CPA_Lady@reddit
I audit employee benefit plans. Even offering a Roth option of any kind is unfortunately fairly uncommon.
Slow_D-oh@reddit
Not OP. Its a way for people who earn beyond Roth limits to still use one. A normal ne involves depositing into a trad IRA and moving it to a Roth. A mega is the same only using a 401(k)
plutopius@reddit
Through strategically setting up trusts within their estate plan. A wealth advisor and estate attorney can help with the following to help reduce taxes:
SLATs, GRATs, CRUTs, ILITs, QPRTs, Dynasty Trusts.
LeadingAvocado1168@reddit
High earners will often work with a CPA and/or a financial advisor. There are obviously costs for that, but it pays for itself in the long run.
MortimerDongle@reddit
Taking your title literally - high earned income - then not all that much. You're going to pay a lot of tax. The best tax avoidance strategies are for unearned income.
LetterheadClassic306@reddit
i ran into this same wall last year after maxing the basics. what moved the needle for me was setting up a backdoor roth ira and looking into tax-loss harvesting in my brokerage account. turbo tax's premium version handles the backdoor roth reporting pretty cleanly - TurboTax Premium. also started using a cpa consultation service for a one-time plan. the tax savings from harvesting losses alone paid for the software a few times over tbh
brain_over_body@reddit
You talk to an attorney about estate planning. That's also a form of tax planning, because they will give you a will or trust that minimizes inheritance taxes if your state has them, federal estate tax, potential capital gains tax depending if you transfer, sell, or run assets through probate, etc.
rawbface@reddit
Hell if I know
BulkyTiger8706@reddit
Usually it means using the tax code before income hits you, not after. Business ownership, real estate, equity comp planning, trusts, timing income, and paying professionals to legally structure everything.
Ok-Energy-9785@reddit
It can mean using tax advantaged accounts to their fullest potential or getting a CPA move money around for you
shelwood46@reddit
If you have that much money, you should pay (well) for a certified financial planner to figure this out, not expect internet strangers to do it for free.
captainstormy@reddit
For me it means hiring an accountant. I'm not a tax expert.
Adorable-Growth-6551@reddit
Accountant
SabresBills69@reddit
:advanced: implies future income planning where you do things like max 401k/IRA, doing Roth, possible investments or deferred income options like being paid in company stock
CG20370417@reddit
My father is a CPA by trade and a CFO by profession.
He paid $600,000 in taxes.
"High earners" can't shield their earnings. Its high wealth that can be shielded.
If you make the money through labor or capital gains the government is going to get their share.
If you made the money through unrealized gains, or increases on the value of land, or broadly by inheritance...there are ways to shield that.
To some degree (and again, refer to the top, I am biased) I think you want some of that in the system. For the last decade, my father could have retired, he's made enough money for himself. But this last decade of work is when he has made *a lot* of his wealth. And its because he has accumulated 40 years of specific experience in his career. He has a experience and knowledge set not many posses and is compensated for it.
The business is better off because he is there. But *he* doesn't need the money. He works now, because he wants to leave a legacy for me, my sister and his grand children. The company would in all likelihood be solvent without him, but its better today in part because of him. and that means the firm can service more clients and accomplish its mission to a higher degree than it otherwise would.
If we concede that businesses exist to solve problems people have, then business being better at doing what it does is better for people.
So to an extent, I want people to be incentivized to work to produce wealth that can be passed on. Those with skill sets that command that kind of compensation should be incentivized to continue to contribute to society.
But.
There's obviously a point of excess that err's into hubris and arrogance.
My father keeps trying to quit, and they keep throwing piles of money at him to stay. Its all he's known for 40 years--dedicating his life to his career--and the numbers are insane, so its hard to say no.
The inverse is people like an Elon Musk who hostilely buys himself into the managing position of, say, a Twitter. Or a Zuckerberg who had the "genius" idea of the Metaverse, and is now following that up with an AI clone of himself instead of just hiring deputies...
I mean me too thanks.
procrasstinating@reddit
There not much else you can do if you have a high w-2 income. You can try to reduce any other taxable income while you have the W2 income. So if you have savings above your 401k & HSA you want to avoid investing that in things that will churn taxable income. Things like dividend stocks or high turn over ETF/mutual funds will generate taxable income that you pay the tax on and then reinvest the income. You may be better off just investing in growth fund that won’t kick out taxable income until you sell (hopefully sell once you retire and the w2 is gone).
OldRaj@reddit
Meet with your accountant quarterly and execute a plan.
Drew707@reddit
r/wallstreetbets
Gold_Telephone_7192@reddit
I think the "tax planning" they talk about for wealthy people is more around investments and planning out when to sell various assets to minimize your tax burden, using tax-loss harvesting, etc. It can also be beneficial when you start planning your retirement and pulling from your 401k vs social security vs other investment vehicles.
Semirhage527@reddit
Since a lot of stuff gets removed, I’m gonna suggest r/personalfinance if this gets taken down
TheButtDog@reddit
more like r/HENRYfinance
Alternative-Law4626@reddit
You could start a “side hustle” and S corp. Run it out of your house. Portions of your house, phone, internet, maintenance, car etc. become tax deductible in support of the business. You would have to show productivity in the business, but it could be an Internet business and you wouldn’t have to necessarily show a profit from the activity.
Curmudgy@reddit
The rule of thumb is showing a profit in 3 out of 5 years. If you don’t do that, then an audit flag will be raised (though there may not be enough auditors to audit all such businesses).
Alternative-Law4626@reddit
Good context!
DubiousSpaniel@reddit
One thing could be investments in real estate, equipment, assets that can be depreciated. Many programs even allow for accelerated depreciation schedules that would allow for a higher amount in a given year. Depreciation is an expense for tax purposes so tax planning could mean offsetting income with the goal of minimizing AGI.
Hegemonic_Smegma@reddit
It means planning and implementing a strategy that minimizes your taxes for the rest of your life. It also makes taxes predictable, which is helpful for financial planning.
The 401k is great for lowering your tax burden now, but the high tax brackets could come calling when you turn 73 and have to start taking required minimum distributions from that 401k. One strategy for minimizing those potentially high tax rates later in life is to retire and begin drawing down your 401k at 59-1/2. That might make sense for you; it might not.
There are so many dynamics at play when you are a high earner that general advice is all but useless. You either need to school yourself on investing and tax planning, or hire an adviser.
SunshynePower@reddit
Go find a reputable investment/financial advisor. An accountant isn't usually the person you want to talk to about where to stick your personal income.
You can look up certified financial planners in your area. They have a financial duty to do what's best for you.
seaburno@reddit
It’s about structuring your income to minimize your tax burden while maximizing your income. The more you can minimize your “above the line” income, and maximize your “below the line” deductions, the less you pay in total taxes. The tax code is huge, and there are a lot of rock solid legitimate ways to do this. There are also a lot of extremely sketchy ways to do it.
There are also a lot of investments that really provide paper losses for taxes while providing asset gains for don the road. There are ways of transferring real property where no gain is realized. There are ways of maximizing the deductions so that itemizing is more beneficial than the standard deductions. I know one of the popular ways is to purchase art at X price, get it appraised at Y value and the loan or donate it to a museum and take the deduction at Y value.
DawaLhamo@reddit
How are we supposed to know?
SenseNo635@reddit
Find yourself a good wealth manager. Mine has me making changes that should save me about $4M in taxes after I retire.
SockSock81219@reddit
You should speak to a financial planner and/or book a session with your CPA well after tax season.
A financial planner will be good for setting up charitable trusts, long-term investments, large financial transactions. I think of them as "so, I won the lottery, what now?" people, to help you manage your money in the long term and grow your wealth.
An accountant will help maximize your deductions and reduce your tax burden year-by-year. They'll hopefully be able to help you strategize contributions to Roth IRAs, donations, loopholes.
Depending on how much wealth you're talking about and what your goals are, one might be more useful to you than the other, or you might use both.
retreff@reddit
Not in the investment or tax planning business, trying to reply generally to your question. Wealth management and tax planning depends on your compensation and your assets. For example if your compensation includes stock options, direct share allocations or deferred compensation you need to plan on how and when you activate the options, how to accept your deferred compensation and when to sell shares. Typically if you have lots of stock in your employer you will want to diversify upon retirement to lower risk. Cashing options in can be very complex, requiring you to take short term loans to have the cash to exercise options. If you are just a W2 or 1099 person you have other choices.
Extension_Plant7262@reddit
If its your W2 then basically nothing outside of maxing out charitable donations. You can do a backdoor IRA to funnel income into retirement funds, invest in RE etc. But most strategies are more around the investment/capital gains side of things
jrolette@reddit
If you are Director+ level and your company has a Deferred Compensation Program, take advantage of that.
ComprehensiveStay755@reddit
Yeah the reason no one gives concrete answers is bc the good stuff usually involves changing your setup, not tweaking your taxes.
Like:
W2 earner → very limited knobs
Business owner / investor → tons of knobs
“Advanced tax planning” is basically:
If you can’t touch those 3, you’re mostly stuck with the basics.
CPGFL@reddit
Having your own business is the key. Run expenses through the business, max out SEP IRAs or create your own 401k (so you can contribute both as an employer and employee), make your spouse an employee of your business so you can have a group health insurance plan and also contribute to your spouse's 401k. Or even without a business, create an irrevocable trust to take advantage of higher estate tax exemption, have a trust or LLC own your house and you pay rent "to your kids," have the trust loan you money, etc...
Tax and trust lawyers are very creative.
IPreferDiamonds@reddit
I always have to pay taxes, so my accountant handles everything for me. I pay extra taxes throughout the year so that on April 15th, I don't have such a huge chunk of taxes owed.
Get a good accountant to help you.
Individual_Check_442@reddit
W-2’s are hard to get out of.
Abu_Everett@reddit
Do you give money to charity? One thing that was helpful to me for that was creating a family foundation and donating appreciated shares to it then using that foundation for your donations. When you do that you get the full deduction right away but do not have to pay any tax on the capital gains for those appreciated shares.
This on a much larger scale is something the mega rich do. Lots of times when you hear of gigantic charitable contributions this is what it really is. They donate shares of companies they control, don’t lose that control, gain a huge tax deduction, and generally the $ in the foundation grow as they give away so little on an annual basis.
Academic-Park-8440@reddit
send money to a internet stranger i volunteer!😂 jk tho but an accountant might be able to help more in how to plan a future, family, etc
Esmar_Renacette@reddit
Maximize tax-advantaged savings vehicles like Roth, SEP, and 529 accounts.
notthegoatseguy@reddit
The vast majority of Americans, even high earners, take the standard deduction.
I am upper middle in my area according to those middle class calculators.
Its more about complexity than earnings. If you are a w2 worker, own a home, have a few 1099s or maybe cashed out an investment, you should be able to do your taxes yourself.
If you own your own business or are a contract worker such as in sales, gig economy, or in a certain industry where your income may be treated differently like a tipped worker, it might be worth sitting down with a professional at least once.
alwaysboopthesnoot@reddit
Is your income mostly derived from your own labor and you are a HENRY by earned income alone, or is it through investments?
IBelongHere@reddit
Honestly, if you’re making that much money, a good accountant will help a lot more than internet strangers
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