Earning more should be a financial advantage, not a tax liability. However, without a strategic plan, high earners often find themselves paying far more than necessary. At Tax Advisors of Cary, we specialize in helping top 1% income earners optimize every angle of their tax profile. Our goal is to ensure you retain as much of your hard-earned income as possible.
Maximize Pre-Tax Contributions
This strategy includes maximizing contributions to 401(k)s, HSAs (Health Savings Accounts), and deferred compensation plans. These not only reduce your current taxable income but also set the stage for future financial freedom and retirement. For 2025, the employee contribution limit for 401(k)s is $23,500 ($31,000 if age 50 or older, and $34,750 for ages 60-63 in qualifying plans). For HSAs, the 2025 limits are $4,300 for individuals and $8,550 for families, with an additional $1,000 catch-up contribution for those age 55 and older. By fully leveraging these accounts, you can significantly decrease your annual tax burden while investing in your long-term security. Additionally, consider catch-up contributions if you’re over 50, which can further enhance your savings and tax benefits.
Consider Entity Structuring
If you earn freelance or consulting income, forming an S-Corp or LLC can open the door to tax-efficient compensation and expense deductions. While LLCs offer liability protection and pass-through taxation, electing S-Corp status for an LLC can significantly reduce self-employment taxes, as you only pay these taxes on a “reasonable salary” you pay yourself, not on all business profits. This can transform how your income is taxed, potentially reducing your overall tax burden. Structuring your business appropriately can also provide liability protection and enhance credibility. Consult with a tax professional to determine the best structure for your specific situation and income streams.
Leverage Real Estate and Depreciation
Real estate investments provide both income and powerful write-offs. Cost segregation studies and depreciation schedules can dramatically reduce your taxable income. Real estate offers numerous tax advantages, including deductions for mortgage interest, property taxes, and depreciation expenses. Depreciation allows you to deduct a portion of the property’s cost each year over its useful life (27.5 years for residential, 39 years for commercial), even if the property is appreciating in value. Strategically timing the sale of properties can also minimize capital gains taxes. Moreover, investing in Opportunity Zones can provide additional tax incentives, including deferring and potentially reducing capital gains taxes.
Charitable Giving Strategies
Donor-Advised Funds (DAFs) and gifting appreciated assets can allow you to give generously while enjoying significant tax benefits. By donating appreciated stocks or other non-cash assets held for more than a year, you can typically deduct the fair market value of the asset and avoid capital gains taxes on the appreciation. DAFs allow you to make a large, tax-deductible donation in one year and then recommend grants to charities over time, providing an immediate tax benefit while maintaining flexibility in your giving. Planning your charitable contributions strategically can significantly reduce your tax liability and support causes you care about.
Manage Capital Gains Intelligently
Harvesting losses, offsetting gains, or using installment sales can reduce capital gains exposure and even out taxable income over time. Tax-loss harvesting involves selling investments at a loss to offset capital gains, and potentially up to $3,000 of ordinary income annually, with unused losses carried forward indefinitely. Offsetting gains with losses can significantly reduce the tax owed on investment profits. Installment sales, where you receive payments for an asset over time, can spread out capital gains recognition and potentially lower your tax rate in any given year. Regularly reviewing your investment portfolio and tax situation is crucial to manage capital gains effectively and minimize your tax burden.
These strategies aren’t just for tax season, they’re for every quarter. Proactive planning throughout the year is essential to optimize your tax position.
Success Through Strategic Tax Planning
Strategic tax planning is a year-round endeavor that plays a crucial role in long-term financial success. For high-income earners, the stakes are particularly high, as proper planning can save significant amounts in taxes and build substantial wealth. By maximizing pre-tax contributions, considering entity structuring, leveraging real estate investments, implementing charitable giving strategies, and intelligently managing capital gains, you can optimize your tax profile and retain more of your earnings. Partnering with experienced tax advisors who specialize in high-income earners can provide personalized guidance and ensure that your strategies are tailored to your specific financial goals and circumstances. Don’t wait until tax season to address these issues, take a proactive approach and secure your financial future today.
Partner With Us Today!
Let us take the stress out of your taxes and help you keep more of what you earn. After all, your focus should be on your work, not on worrying about tax laws.
At Tax Advisors of Cary, we’re dedicated to helping you navigate complex filings, maximize deductions, and achieve your financial goals with confidence. Connect with us today to schedule an appointment and discover how our expert team can make tax season easier and more rewarding. Let’s work together for your success!
