Comprehensive and strategic tax planning is important for earners at all income levels. However, it’s particularly crucial for high-income taxpayers. They simply have more at stake between tax exposure, deductions, credits, and retirement planning.
How can high-net-worth individuals ramp up tax planning at return time? This post takes a look at strategies that could keep more cash in your hands.
Key Tax Strategies for High-Income Earners
Here are a few basic tax planning steps particularly helpful for those with high incomes.
Max Out Retirement Matching Options
All employee contributions to traditional IRAs and 401(k) plans are made before taxes. The IRS’s annual limits in 2025 limits are:
- $7,000 for individuals with traditional or Roth IRAs
- $8,000 for individuals over 50 making catch-up contributions
- $11,250 for employees between 60 and 63 making catch-up contributions
- $23,500 for contributions to 401(k) plans
All types of retirement accounts grow tax-free. Although contributions to Roth IRAs are made after taxes, withdrawals are tax-free.
Note that retirement plans like 401(k)s may not be the most efficient option to grow your retirement funds—consider contributing up to the max of any match you receive and using other forms of wealth building for the biggest impact on your retirement savings.
Use Health Savings Accounts (HSAs)
HSAs are increasingly popular because of their tax advantages. Contributions are tax-deductible, and growth and withdrawals for approved medical expenses are tax-free. HSAs are especially good options for enrollees in health plans with high deductibles.
Take Out Tax-Efficient Investments
Municipal bonds are considered safe ports in economic storms. Federal bonds pay out tax-free interest income, as do many state and local bonds. Another solid investment strategy is tax-loss harvesting, in which you can offset capital gains with investments sold for a loss.
Optimize Charitable Giving
Donor-advised funds are ways to maximize taxes while contributing to charity causes. You get an immediate tax deduction on whatever you contribute. The 2025 limit for charitable donations is 50% of your adjusted gross income. You might also consider bunching multiple years of donations into a single tax year, topping the standard deduction limit.
How Retirement Accounts Impact Your Tax Burden
Traditional IRAs and 401(k)s affect your tax exposure in different ways.
Pre-Tax Contributions to Traditional Accounts
The contribution structure of traditional IRAs and 401(k)s reduces your current taxable income, which is why it’s a good idea to max out any contributions that apply for employer-matched funds. Withdrawals in retirement are taxed like normal income, and that could affect your tax bracket.
Required Minimum Distributions (RMDs)
If you have a traditional retirement fund, you’re required to start taking RMDs—withdrawals from the fund—before you turn age 73. Those who fail to do so face stiff penalties.
A potential drawback of delaying RMDs is that your taxable income may increase since your withdrawals are likely higher. Work with a financial advisor to determine the optimal point of distribution.
Roth Conversions and Tax-Efficient Withdrawals
Those who can afford to live with after-tax contributions to a Roth IRA may find it a more viable option than traditional funds and 401(k)s. Roth conversions of those funds involve remitting tax payments for the entire converted amount the year they get changed over.
Once the funds are converted, they grow tax-free. But after retirement, withdrawals are also tax-free. Roth plans also don’t include RMDs, so you have more control over your taxable income. Converting during times of lower income or market downturns may limit your tax liability.
Conversion Timing and Tax-Efficient Withdrawals
Those with multiple savings accounts are advised to sequence monthly withdrawals to maximize tax efficiency. Withdrawals from taxable accounts go first, tax-deferred accounts next, and tax-free accounts like Roth plans last.
Your Partner in Effective Tax Planning
For affluent individuals like you, strategic tax planning can significantly change and improve your tax situation. A personalized approach that takes your family’s needs into account can be a game-changer.
Truvium Wealth Management helps individuals and families optimize their financial position. To schedule a meeting, call (877) 277-2751 or email info@truviumwealth.com.
About Scott
Scott Gegerson is the President of Truvium Wealth Management, a holistic financial planning firm based in Garden City, New York, serving individuals and business owners nationwide. He develops personalized financial plans and builds lasting client relationships grounded in trust and education. Since starting his career as a financial planner in 2001, Scott has been dedicated to helping clients grow and preserve their wealth. His passion stems from personal family experiences with poor financial planning, inspiring him to help his clients avoid similar pitfalls.
With a bachelor’s degree from Villanova University and the CERTIFIED FINANCIAL PLANNER® designation, Scott leads Truvium’s comprehensive approach to wealth management. He brings together advisors, attorneys, CPAs, and other professionals to create cohesive, streamlined financial strategies. His clients appreciate the firm’s white-glove service, personalized guidance, and commitment to alleviating financial stress.
Based in Rockville Centre, NY, Scott is a devoted father and active community member, helping out with his kids’ sports and volunteering locally. He enjoys golf, skiing, surfing, and leading a healthy lifestyle. Scott is also committed to cancer research through the Leukemia & Lymphoma Society, honoring his parents’ memory. To learn more about Scott, connect with him on LinkedIn.