11 Proven Tax Strategies for High-Income Earners in 2025
The tax code isn’t written for the average taxpayer. If you’re earning in the top income brackets, you’re not just taxed more — you’re taxed differently. In 2025, changes in legislation, expiring provisions from the Tax Cuts and Jobs Act (TCJA), and new IRS thresholds mean the stakes are higher than ever.
At Square Accounting, we help high-income professionals, business owners, and executives legally reduce their tax burden through proactive planning. Here’s our updated, field-tested guide to 11 proven tax strategies for high-income earners in 2025.
1. Know What Changed in 2025
Tax laws didn’t stand still this year. Here’s what you’re up against:
Top marginal tax rate: 37% for individuals earning over $626,350 (joint filers over $751,600).
Standard deduction: Increased to $15,000 (single) and $30,000 (joint).
Alternative Minimum Tax (AMT): New exemption thresholds at $88,100 (individual) and $137,000 (married).
Gift & Estate Tax: Still historically high at $13.99 million — but scheduled to drop after 2025.
SALT deduction cap: May increase to $30,000–$40,000 for households under $500K.
New deductions: Extra $4,000 for seniors, continued child tax credit, and overtime/tip deductions for W-2 earners.
Confused by what this means for your personal return? Schedule a tax strategy session with Square Accounting →
2. Max Out Tax-Deferred Contributions
Contributing to retirement plans remains one of the most straightforward ways to cut your taxable income. In 2025:
401(k) limit: $23,500
Catch-up contribution (ages 60–63): $11,250
SEP IRA limit (for the self-employed): Up to $69,000
Don’t just rely on your employer’s plan. Explore solo 401(k)s and cash balance pension plans if you’re self-employed or a business owner.
Pro tip: Even high earners can benefit from traditional IRAs via backdoor Roth conversions. Ask us how.
3. Maximize Your HSA — and Your FSA
The Health Savings Account (HSA) is the only triple-tax-advantaged account available today: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
2025 family limit: $8,300
FSA contribution limit: $3,300 (+ $660 carryover)
These aren’t just for out-of-pocket expenses. HSAs can be used strategically as a stealth retirement tool.
4. Supercharge Giving with Donor-Advised Funds
Thinking of making a large charitable donation this year? Consider a Donor-Advised Fund (DAF). You get an immediate tax deduction while distributing the funds over time.
Bonus: If you donate appreciated assets (like stocks), you avoid capital gains and get the full deduction.
Let’s talk about charitable giving with impact. Book a strategy session with our team →
5. Invest Tax-Efficiently
Tax efficiency matters more when you’re in a high bracket. Here’s what works in 2025:
ETFs (over mutual funds) for minimal capital gains
Municipal bonds for federally tax-free income
Direct indexing to harvest tax losses while maintaining portfolio balance
We run these filters for our clients daily to minimize their tax drag.
6. Open a Defined Benefit or Deferred Comp Plan
If you’re a high earner nearing retirement, a defined benefit plan can allow you to contribute well over $100,000 per year—all tax-deductible. If you’re a corporate executive, look into Non-Qualified Deferred Compensation Plans to defer income and reduce current-year taxes.
Need help setting one up? Square Accounting can design and implement your plan end-to-end. Let’s chat →
7. Shift Income Strategically
Income shifting isn’t just for big corporations. Gifting up to $19,000 annually to each family member or hiring your children to work in your business (at reasonable rates) are legal ways to reduce your AGI.
Just be sure the work is legitimate and well-documented. The IRS isn’t casual about this one.
8. Get the Most Out of Real Estate
Real estate is still the king of tax sheltering:
Depreciation allows you to write off property value without losing cash.
Cost segregation can dramatically accelerate those write-offs.
1031 exchanges let you defer capital gains on sales by rolling into new property.
We’ve helped clients turn six-figure tax bills into tax-deferred wealth. Let’s see what your portfolio can do. →
9. Harvest Losses to Offset Gains
Capital gains taxes can quietly bleed you dry. In 2025, use tax-loss harvesting to offset gains and up to $3,000 of ordinary income annually. Markets are volatile—use that to your advantage.
Direct indexing makes this strategy automatic. We’ll set it up for you.
10. Reevaluate Your Business Entity
Your legal structure affects your tax rate:
S Corp: May reduce self-employment tax
LLC: Flexible, but lacks payroll tax relief
C Corp: Useful for retained earnings—but watch the double taxation
QBI Deduction: Still active, up to 23% depending on income and industry
A quick entity review could save you tens of thousands annually.
We offer entity evaluations. Request yours today →
11. Watch Out for the 3.8% NIIT
If your AGI is over $200K (single) or $250K (married), you’re likely paying the Net Investment Income Tax (NIIT). Avoid or minimize it by:
Shifting to tax-exempt income (like muni bonds)
Increasing business involvement in rentals
Timing income and gains to stay under thresholds.
12. Consider Strategic Roth Conversions
If your income is lower than usual—or you expect higher taxes in the future—a Roth conversion might make sense. Pay tax now, and enjoy tax-free growth forever.
A partial conversion each year may help you stay in a favorable bracket.
13. Bonus: Take the New Senior Deduction or Family Credits
If you’re 65 or older, you may qualify for a new $4,000 deduction under the 2025 tax bill. Also, the enhanced child tax credit and deductions for overtime/tip income could help dual-income households.
Let’s Make 2025 Your Most Tax-Efficient Year Yet
At Square Accounting, we specialize in helping high-income clients minimize taxes without crossing the line. Whether you’re a surgeon, startup founder, law partner, or real estate mogul—we’ve seen your scenario and built a plan for it.
Ready to optimize your tax strategy?
Book a 1-on-1 consultation now →
Or email us at:
client@sqaccounting.com
The tax code may be complicated, but your strategy shouldn’t be. Let’s make every dollar count.
Frequently Asked Questions (FAQs)
What are the best tax strategies for high-income earners in 2025?
The top tax strategies for high-income earners in 2025 include maxing out tax-deferred retirement contributions, leveraging HSAs and FSAs, using donor-advised funds for charitable giving, optimizing real estate depreciation, and utilizing Roth conversions during low-income years. Each of these tactics helps reduce taxable income or defer tax liabilities legally and efficiently.
How can I reduce my taxable income if I make over $500,000 a year?
If your income exceeds $500,000, you can reduce your taxable income by contributing to defined benefit plans, shifting income to family members, investing in municipal bonds, and harvesting capital losses. Business owners can also reassess their entity structure for better tax efficiency. A custom tax plan from a CPA firm like Square Accounting can reveal significant savings.
Is there a new tax law affecting high earners in 2025?
Yes. In 2025, new tax provisions include adjusted income thresholds, an increased standard deduction, possible SALT cap changes, and an expanded senior deduction. Additionally, many TCJA provisions are set to expire after 2025, which could dramatically impact tax planning for high-income individuals.
Are Roth conversions smart for high earners in 2025?
Roth conversions can be highly strategic for high earners, especially in years when their taxable income is temporarily lower. Converting traditional IRA assets to a Roth IRA now allows for tax-free growth and no required minimum distributions (RMDs) later. Timing is key—work with a tax professional to avoid bracket creep.
What is the Net Investment Income Tax (NIIT), and who pays it?
The 3.8% Net Investment Income Tax applies to individuals with a modified adjusted gross income over $200,000 (or $250,000 for joint filers). It applies to interest, dividends, capital gains, rental income, and passive business income. High-income earners can reduce exposure by using tax-exempt investments and managing income thresholds.
Can I still deduct charitable contributions in 2025?
Yes, but new legislation may impose limits on itemized charitable deductions. Donating through a donor-advised fund or gifting appreciated assets can help you lock in the full deduction before caps are enforced. A tax advisor can help you structure gifts for maximum benefit.
How much can I contribute to my 401(k) in 2025?
In 2025, the 401(k) contribution limit is $23,500. If you’re aged 60–63, you may qualify for an enhanced catch-up contribution of up to $11,250. These contributions are tax-deferred and lower your taxable income for the year.
What’s the best way to avoid capital gains tax in 2025?
To minimize or avoid capital gains tax in 2025, consider tax-loss harvesting, using a 1031 exchange for real estate, or holding appreciated assets until death for a step-up in basis. Gifting appreciated assets to lower-income family members can also reduce or eliminate capital gains tax.
Should I restructure my business for tax savings?
Possibly. Business entity structure directly affects how you’re taxed. An S Corporation may help reduce self-employment taxes, while a C Corporation can offer long-term tax deferral strategies. Square Accounting offers entity evaluations to determine the most tax-efficient setup for your business.
How do high-income earners plan for the 2026 tax changes?
Many TCJA provisions are scheduled to expire after 2025, which could increase taxes for high earners. Planning in 2025 should include Roth conversions, income acceleration, large charitable gifts, and estate planning moves before potential exemptions are reduced. Act now to stay ahead of the curve.
Need a personalized answer?
Contact Square Accounting to speak with a tax strategist →
