Paying taxes is inevitable. Overpaying is not.
For high earners, the difference between what you owe and what you could owe often comes down to proactive tax planning strategies. With the right approach, you can reduce your taxable income, optimize your deductions and credits, and structure your financial decisions to minimize your tax bill and maximize tax savings.
At Schmidt Financial Management, we work with tech executives and high-income professionals to build integrated tax strategies that align with their equity compensation, investments, and retirement accounts. Our approach is proactive, not reactive—because the biggest opportunities often come from decisions made well before you file your tax return with a tax advisor.
What Is High Income Tax Planning?
High-income tax planning is about being intentional with your income, investments, and expenses so that you’re not paying more in taxes than you need to. It's a key part of how we help clients align their financial decisions with their broader goals.
[Read on below]
[Continued]
Right now, we’re looking closely at strategies like maximizing tax-advantaged accounts—think traditional and 401(k)s, Roth IRAs, and HSAs—as well as managing long-term capital gains and incorporating charitable giving. We're also helping clients identify deductions they might qualify for, including certain medical expenses and property taxes.
Ultimately, it’s about taking control of what you can. The goal isn’t just to reduce this year’s tax burden—it’s to support your long-term financial goals, including retirement readiness, liquidity, and estate planning.
How Tax Brackets Work in a Progressive System
The U.S. operates under a progressive tax system. That means only the portion of your income that falls within a given federal income tax bracket is taxed at that rate—not your entire income.
We help clients understand how this actually plays out. For example, part of your income might be taxed at 24%, but only the dollars above the bracket threshold get taxed at the higher 32% rate—your earlier income stays at the lower rates. The key is managing when and how income is recognized so you can minimize the amount that gets taxed at those higher marginal rates and optimize your overall tax liability.
That’s where timing becomes a powerful tool. Whether it’s a bonus, RSU vesting, a business windfall, or retirement withdrawals, we help clients plan around these events to keep more income in the lower brackets.
With strategies like Roth conversions, charitable giving, or capital gains harvesting, tax brackets become less of a hurdle and more of a lever. With the right planning, there’s a lot you can control—and that can make a real impact over time.
How To Reduce Taxable Income For High Earners
For high earners, reducing taxable income is absolutely possible—but it takes planning. And the reality is, the more income you earn, the more complex those opportunities become. That’s why working with an advisor who understands both your financial life and the tax landscape can make a real difference.
At Schmidt FM, we build these strategies into long-term plans that reduce taxes and support your bigger financial picture.
1. Income Management and Timing Strategies
When you’re expecting a spike in ordinary income—whether it’s RSUs vesting, a bonus, or a strong business year—timing matters. Thoughtful planning can keep more of that income in lower tax brackets.Here’s what we’re helping clients with right now:
- Deferring income, like bonuses, into future years when possible.
- Accelerating deductions before year-end.
- Increasing pre-tax contributions to things like 401(k)s, traditional IRAs, or HSAs to reduce adjusted gross income (AGI).
These moves need to be executed carefully to stay within IRS rules. We incorporate them into your long-term plan with considerations towards remaining compliant and effective.
2. Investment and Asset Location Strategies
Where you hold investments matters just as much as what you invest in. Optimizing asset location can reduce taxes without changing your actual portfolio allocation. Schmidt's Tax Dashboard helps clients to see this strategy in action.
Here’s how we help clients approach it:
- Holding tax-inefficient assets (like actively traded funds or high-yield bonds) in tax-deferred accounts like IRAs or 401(k)s.
- Keeping tax-efficient assets (like ETFs or municipal bonds) in taxable brokerage accounts.
We also help clients:
- Max out tax-advantaged accounts (including Roth IRAs through backdoor conversions).
- Navigate contribution limits and avoid penalties.
- Use these tools to reduce taxes now and build long-term, tax-free growth.
3. Capital Gains and Loss Harvesting
If you’re a high-income investor, managing capital gains is critical. Holding assets for more than a year qualifies you for lower long-term capital gains rates—but smart planning can take that even further.
We’re seeing great outcomes with:
- Tax-loss harvesting to offset gains—especially useful during market dips.
- Timing asset sales to avoid bumping into higher income thresholds.
- Donating appreciated assets to sidestep capital gains and gain a deduction.
It’s not just about saving money in one year—it’s about building after-tax wealth over
time.
4. Retirement Planning Tax Strategies
Smart retirement planning can dramatically reduce lifetime tax liability.
Roth conversions, for instance, allow you to pay taxes now on assets moved from a traditional IRA to a Roth, enabling tax-free withdrawals in retirement. And they’re especially useful in low-income years or early retirement.
We guide clients through:
- Calculating the right conversion amount to avoid jumping brackets or triggering Medicare surcharges.
- Assessing how conversions impact long-term goals.
- Using Roths to support estate planning and manage future RMDs.
When done thoughtfully, this can dramatically reduce your lifetime tax bill.
5. Charitable Giving Strategies
Charitable giving can be both generous and strategic. We help clients align their giving with high-income years for maximum tax impact—while staying true to their values.
Some of the tools we use:
- Qualified Charitable Distributions (QCDs): If you're over 70½, you can donate directly from your IRA—satisfying RMDs and reducing AGI at the same time.
- Donor-Advised Funds (DAFs): Great for liquidity events, DAFs let you take a deduction now and give over time.
- Donating appreciated assets: This helps clients avoid capital gains and still get a deduction for the full fair market value.
It’s about using your wealth to support what matters—while staying tax-smart.
6. Real Estate and Cryptocurrency Tax Planning
Real Estate Tax Strategies
- 1031 exchanges defer capital gains when reinvesting in similar properties.
- Depreciation deductions reduce rental income on paper, often creating tax-advantaged cash flow.
- Primary home sale exclusions can shelter up to $500,000 (married filing jointly) of gains if requirements are met.
We work with clients to align real estate investments with broader tax and estate planning goals.
Cryptocurrency Tax Considerations
The IRS treats crypto as property, meaning every transaction is potentially taxable. This includes trades, staking rewards, and even airdrops.
If clients hold crypto, we highly recommend implementing the following practices as a way of managing a potentially volatile investment:
- Tracking cost basis and ensuring accurate reporting.
- Offsetting gains with crypto-related losses.
- Timing trades strategically in light of evolving IRS guidance.
For high earners, tax strategies work best when they’re part of a coordinated, long-term plan. At Schmidt FM, we bring clarity, strategy, and timely execution to help you reduce your tax burden, preserve wealth, and move confidently toward your financial goals—year after year.
Tax Planning Tips
We believe the foundation of great tax planning is staying organized. That means keeping accurate, up-to-date records on income, investments, equity compensation, and charitable giving. Digital tools can help streamline this, but the real value comes from turning that information into strategy.
That’s where we come in.
At Schmidt FM, we partner closely with CPAs and estate attorneys to take the lead on proactive, long-term tax planning. Our goal is to make sure your day-to-day decisions are always aligned with your broader financial picture. Software is useful—but it can’t replace strategic thinking.
We’re also helping clients stay ahead of the tax trends that matter most right now:
- Increased IRS automation means higher audit risk—especially for high earners with complex equity, crypto, or international assets.
- Cross-border tax issues are showing up more often as clients work remotely or move abroad.
- SALT rules, income thresholds, and Medicare surcharges are shifting fast—adding layers of complexity, particularly for clients with variable income or relocation plans.
Bottom line: staying compliant isn’t enough anymore. For high earners, the real edge comes from planning ahead—so when policies tighten or reporting requirements change, you’re not scrambling. You’re already prepared.
Recommended Next Steps
- Schedule a comprehensive review of your income, equity, and investment strategies.
- Consult with your advisor and CPA before major financial moves.
- Develop a personalized tax strategy that integrates with your retirement, charitable, and estate planning goals.
- Keep up with new legislation and IRS guidance, especially around digital assets and equity compensation.
Conclusion
High earners need proactive tax planning that keeps pace with policy changes and enforcement trends—because when rules tighten, the advantage goes to those who planned ahead.
At Schmidt Financial Management, we help you design and execute a tax plan that may help reduce liability while also supporting the bigger picture of your wealth. From equity compensation to retirement income, our goal is to help you keep more of what you earn—and make it work harder for your future.
📊 Ready to rethink your tax strategy? Talk with a tax-smart advisor at Schmidt FM today.
Frequently Asked Questions About Tax Planning for
High-Income Earners
1. What’s the biggest mistake high earners make with taxes?
Waiting until tax season to start planning. Most tax-saving opportunities disappear if you wait until you’re filing. We work with clients throughout the year to identify and act on strategies while there’s still time to make an impact.
2. How can I reduce taxes without sacrificing growth?
It’s not either-or. Smart tax planning often complements growth—by placing the right investments in the right accounts (tax-efficient asset location), managing capital gains, and using vehicles like HSAs or Roth IRAs strategically. You don’t need to take your foot off the gas to be tax-savvy.
3. What’s the benefit of a Roth conversion, and when should I consider one?
Roth conversions can reduce future taxes by moving funds from tax-deferred to tax-free accounts. They’re especially powerful in low-income years, early retirement, or when you expect higher future tax rates. Timing and tax bracket management are everything here.
4. I already work with a CPA—do I still need a financial advisor for
tax planning?
Yes. CPAs are essential, but they typically focus on filing and compliance. At Schmidt FM, we focus on planning ahead—integrating your taxes with your investments, equity compensation, retirement, and estate goals. It’s not about replacing your CPA—it’s about giving them better data and direction.
5. How do I manage taxes on equity compensation like RSUs and stock options?
Equity compensation comes with real tax complexity. We help you understand how and when income is recognized, coordinate with your CPA on withholding, and build a strategy for exercising and selling that reduces surprise taxes and supports your broader financial goals.
6. Are there ways to give charitably and still reduce my taxes?
Absolutely. Tools like Donor-Advised Funds (DAFs), Qualified Charitable Distributions (QCDs), and donating appreciated assets can all reduce your tax burden while supporting causes you care about. We help clients align giving with their high-income years for maximum impact.
7. What should I do in a high-income year to avoid a massive tax
bill?
Start planning now. That might include accelerating deductions, increasing retirement contributions, deferring income where possible, or using charitable strategies. We’ll help you model scenarios and make decisions that smooth out your tax exposure over time.
8. How often should I update my tax plan?
At least annually—and any time you experience a major life or financial change: job transitions, big bonuses, equity events, business sales, relocation, retirement. Tax planning isn’t a one-and-done—it’s an ongoing part of smart wealth management.