High earners in the 35% and 37% federal brackets reduce tax in four ways: deferring income, excluding it, deducting against it, or changing when and how it’s taxed.
Which of those you can use depends on how you earn your money. A salary leaves fewer levers than a business, a rental portfolio, or a large investment account.
For 2026, Rev. Proc. 2025-32 sets the top brackets:
| Bracket | Single filers | Married filing jointly |
|---|---|---|
| 35% | Above $256,225 | Above $512,450 |
| 37% | Above $640,600 | Above $768,700 |
How can high income earners legally reduce taxable income?
Legal strategies fall into four groups (IRS Publication 17):
- Defer: move income to a later year, as pre-tax retirement contributions and deferred compensation do.
- Exclude: keep income out of the tax base entirely, as municipal bond interest or qualifying QSBS gain is.
- Deduct: subtract an expense, such as depreciation on a rental or a charitable gift.
- Shift timing or character: turn ordinary income into long-term capital gain, or move income into a lower-tax year.
Which tax-advantaged accounts matter most at high incomes?
For employees, the core accounts are:
- A 401(k) and an HSA.
- A backdoor Roth IRA when income is too high for a direct Roth contribution.
- A mega backdoor Roth if your plan allows after-tax contributions.
- A nonqualified deferred compensation plan, which can push salary or bonus into later years. The election generally has to be made before the year you earn the pay.
How to set each of these through payroll, including the 401(k) match and HSA payroll tax details, is in the W-2 guide.
If you’re self-employed, the limits are much higher, under the 2026 plan limits:
| Plan | 2026 limit | Best fit |
|---|---|---|
| Solo 401(k) | $72,000 annual additions, employee plus employer | Self-employed with no employees |
| Defined benefit plan | $290,000 annual benefit | Older owners with steady profits |
What business ownership strategies can help high income earners save on taxes?
The S corporation election. As an S corporation owner who works in the business, you must pay yourself a reasonable salary, which is subject to payroll tax. Profits you take as distributions aren’t. The IRS looks at salaries set too low, so this works best when there’s real profit above a defensible wage.
The 20% qualified business income deduction. For 2026, the QBI deduction starts phasing out above $201,750 of taxable income for single filers and $403,500 for joint filers.
The pass-through entity tax election. Many states let a partnership or S corporation pay state income tax at the entity level. The IRS confirmed in Notice 2020-75 that the entity can deduct those payments, which gives owners a route around the cap on deducting state and local taxes individually.
How do real estate investments create tax benefits for high income earners?
Depreciation is the main benefit. It lets you deduct the cost of a building over time, and a cost segregation study can move parts of the property into shorter recovery periods. Under the 2025 tax law, 100% bonus depreciation is permanent for qualifying property acquired after January 19, 2025, according to NATP’s summary of the IRS guidance.
Whether those deductions help you this year depends on the passive activity rules in Section 469:
- Rental losses are generally passive. The $25,000 allowance for active rental owners phases out between $100,000 and $150,000 of modified AGI, so most high earners get none of it.
- Real estate professional status removes the limit, but it requires more than 750 hours a year in real property businesses and more than half your working time. A full-time employee rarely meets it.
When does tax-loss harvesting make sense for high income earners?
Tax-loss harvesting is worth the most against short-term gains. Those can be taxed at 37% plus the 3.8% net investment income tax, compared with 23.8% on long-term gains at the top rate.
Capital gains tax minimization goes beyond harvesting:
- Hold positions more than one year when you can, so gains qualify for long-term rates.
- Use tax-efficient asset allocation, placing bonds and other income-heavy holdings in tax-advantaged accounts and tax-efficient funds in taxable ones.
- Check the QSBS exclusion if you founded or invested early in a C corporation.
Should high income earners use bonds for tax-efficient income?
Often, yes. Interest on municipal bonds is generally excluded from federal income under Section 103, and it isn’t net investment income. Bonds issued in your own state can also avoid state tax.
Two caveats apply:
- AMT: interest on some private activity bonds counts for the alternative minimum tax.
- Treasuries: Treasury interest is exempt from state income tax, which can make Treasuries competitive with munis in high-tax states.
How does charitable giving reduce taxes for high earners?
Most charitable giving tax benefits for high earners come from a few tools:
- Donating appreciated stock you’ve held more than a year avoids the capital gain and still generally gives you a deduction at market value (IRS Publication 526).
- A donor-advised fund lets you bunch several years of gifts into one high-income year.
- A qualified charitable distribution from your IRA at 70½ or older goes straight to the charity and stays out of your income, per IRS Publication 590-B.
The floor makes bunching worth more. One large gift to a donor-advised fund clears the 0.5% floor once. The same total spread over four years gets cut by the floor four times.
How Nino helps high earners plan taxes year-round
Most of these strategies have deadlines well before filing season:
- a deferred compensation election,
- a retirement plan setup,
- a rental’s first-year hours log, and
- a December harvest.
Nino pairs AI-powered planning software with a dedicated financial planner and CPA who model your full income mix across years, so long-term tax planning strategies get set while they can still change the outcome.
Book a free consultation to see which levers fit your income. Every Advisor plan includes a 30-day money-back guarantee; see plans and pricing.