When it comes to taxes, having a higher income may not always be the blessing it’s often thought to be. With a bigger income comes increased tax rates, as moving into a higher tax bracket means a larger portion of income will be taxed at a higher rate. Those earners with multiple streams of income — investment income, capital gains, bonuses and more — can further complicate their taxes.
These factors, paired with the possibility of losing out on certain deductions or credits due to their income, mean high-income earners are often on the lookout for ways to optimize their tax strategy and minimize their tax liabilities, or what they owe.
As financial and tax experts themselves, the members of Kiplinger Advisor Collective know the ins and outs of effective tax strategies. Here, they offer up six ways high-income earners can minimize their tax liabilities and keep more money in their pockets.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Maximize contributions to tax-advantaged accounts
“High-income earners can optimize their tax strategy by maximizing contributions to tax-advantaged accounts like 401(k)s, IRAs or health savings accounts (HSAs). This reduces taxable income, lowering their overall tax burden. It’s effective because it not only provides immediate tax savings, but it also allows wealth to grow tax-deferred, enhancing long-term financial planning and retirement savings.” — Stephen Nalley, Black Briar Advisors
Sell investments that have depreciated
“Selling investments that have depreciated since you bought them, also known as tax-loss harvesting, can help you lower your tax burden each year. These losses can also be deducted from your investment gains or other income, up to an annual limit set by the IRS. If your losses are greater than these limits, you can carry them over to the following year to reduce your taxes in future years.” — Justin Donald, Lifestyle Investor
Choose a fee-only CFP
“The development of software analysis tools that can provide an integrated and holistic view of your financial situation, including how your tax liabilities affect the rest of your financial life, has increased significantly. Choosing the right fee-only Certified Financial Planner (CFP®) who offers a cost-effective way to integrate sophisticated and holistic tax planning strategies with financial planning is critical.” — Deborah W. Ellis, Ellis Wealth Planning
Take a three-pronged approach
“There are three important areas to consider for tax efficiency. Deferring taxes: Utilize preferential accounts such as 401(k)s, IRAs and annuities. Managing existing investment income: Place tax-inefficient assets in tax-deferred accounts, harvest tax losses and manage gains and distributions. Reducing future taxes: Use Roth IRAs, health savings accounts, 529s and municipal bonds to limit future taxes.” — Stephen Kates, Annuity.org
Minimize portfolio turnover
“Maximizing tax-advantaged savings to your retirement plan or health savings accounts can reduce your taxable income. Take advantage of charitable contributions, and minimize turnover in your portfolio by investing in transparent, diversified and tax-efficient exchange-traded funds (ETFs).” — Marguerita Cheng, Blue Ocean Global Wealth
Consider your highest-income years
“Explore depreciation. Often, high-income earners get to participate in depreciation on assets bought with debt. Plan for this in your highest-income years to maximize the benefit.” — Justin Brock, Bobby Brock Insurance
Related Content
- Three Tips for Selling Your Business and Getting the Most Value
- Five Ways to Minimize a Higher Capital Gains Tax Rate
- How Tax-Loss Harvesting Helps to Lower Your Tax Bill
- The IRS is Ramping up Tax Audits
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
-
To Reap the Full Benefits of Tax-Loss Harvesting, Consider This Investment Strategist's StepsTax-loss harvesting can offer more advantages for investors than tax relief. Over the long term, it can potentially help you maintain a robust portfolio and build wealth.
-
New Opportunity Zone Rules Triple Tax Benefits for Rural Investments: Here's Your 2027 StrategyNew IRS guidance just reshaped the opportunity zone landscape for 2027. Here's what high-net-worth investors need to know about the enhanced rural benefits.
-
The OBBB Ushers in a New Era of Energy Investing: What You Need to Know About Tax Breaks and MoreThe new tax law has changed the energy investing landscape with expanded incentives and permanent tax benefits for oil and gas production.
-
Ten Ways Family Offices Can Build Resilience in a Volatile WorldFamily offices are shifting their global investment priorities and goals in the face of uncertainty, volatile markets and the influence of younger generations.
-
I'm a Financial Planner: If You're Within 10 Years of Retiring, Do This TodayDon't want to run out of money in retirement? You need a retirement plan that accounts for income, market risk, taxes and more. Don't regret putting it off.
-
What’s the New 2026 Estate Tax Exemption Amount?Estate Tax The IRS just increased the exemption as we enter into a promising tax year for estates and inheritances.
-
How the One Big Beautiful Bill Will Change Charitable GivingTaxpayers who don't itemize will be able to take a bigger deduction for donations, which could boost giving. However, high-income donors could see their tax benefits reduced.
-
Your 401(k) Can Now Include Alternative Assets, But Should It? A Financial Adviser Weighs InMany employer-sponsored plans offer limited investment options, which can stunt growth. But participants considering alternatives might need some sound advice to get the most from their accounts.
