Money Moves High Earners Should Make To Reduce Their Tax Burden

High-earning individuals are responsible for a large share of the U.S. federal income tax burden. According to the most recent Statistics of Income data, the top 10% of earners accounted for roughly 76% of all personal income taxes paid to the IRS.

As a result, tax planning tends to matter more at higher income levels. Fortunately, high earners also have additional opportunities to reduce their tax burden. Let’s explore what you should know to maximize your 2025 tax savings, given recent legislative changes.

What’s Changing for High Earners Going Into 2026?

The Tax Cuts and Jobs Act (TCJA) of 2017 was a major tax bill that established much of the modern tax landscape. For example, it lowered marginal tax brackets, doubled the standard deduction and estate tax exemption, and limited or eliminated many itemized deductions.

Most TCJA provisions were set to expire at the end of 2025. This would have reverted certain tax laws to their pre-2017 state and likely increased the tax burden on many individuals. But when the One Big Beautiful Bill ACT (OBBBA) was signed into law in July 2025, it made multiple key TCJA provisions permanent.

This means that many tax laws from the 2017 to 2025 period will remain unchanged in future tax years. However, the OBBBA also included several new provisions, some of which took effect immediately and may impact your 2025 tax return.

Here are a few of the changes that are most relevant to high-income earners for returns filed in 2026:

• SALT deduction: The state and local tax (SALT) deduction allows those who itemize to deduct the sales, property, and income taxes paid to state and local governments during the tax year. The OBBBA increased the annual limit from $10,000 to $40,000.
• 529 plans: 529 plans are tax-advantaged accounts that provide tax-deferred growth and tax-free withdrawals for qualified education expenses. The OBBBA significantly expanded the list of qualified expenses for 2025 to include additional elementary, secondary, homeschool, and higher education costs.
• Clean energy credits: The OBBBA accelerated the termination of several clean energy tax credits. The New and Used Clean Vehicle Credits are no longer available for vehicles placed in service after September 30, 2025, and the Energy Efficiency Home Improvement Credit (EEHIC) and Residential Clean Energy Credit are unavailable for improvements made after December 31, 2025.

How To Assess Your Tax Position

It’s always a good idea to review your tax position at year-end, but it’s especially important when there’s new legislation to consider. In light of the OBBBA and other 2025 updates for inflation, you may need to make adjustments to your tax strategy.

Start by calculating your total taxable income for 2025, including:

• Salaries, wages, and bonuses
• Business and self-employment income
• Interest and dividends
• Equity compensation

Compare your expected earnings to the updated tax brackets and income-based phaseout thresholds for 2025. This will help you estimate your tax liability and determine which deductions and credits you can claim.

With these numbers in hand, review your previous-year tax strategies to determine which are still applicable and where adjustments may be beneficial. For example, the increased cap on the SALT deduction makes itemizing more attractive, especially if you live in a state with high sales, income, or property tax rates.

Consulting with a Certified Public Accountant (CPA) or other tax professional is often worthwhile. They can help you maximize your tax savings, remain in compliance with current tax law, and set yourself up for success as regulations continue to evolve.

Tax-Saving Money Moves High Earners Can Still Make

The 2025 tax year has already come to a close, but there are still steps you can take to reduce your tax liability before filing your return. Most notably, several tax-advantaged accounts allow for potentially tax-deductible contributions up until the filing deadline.

If you’re eligible, health savings accounts (HSAs) are often the most lucrative dollar-for-dollar. They offer a unique triple tax benefit: contributions are tax-deductible, investments grow tax-deferred, and qualified withdrawals are tax-free.

For tax year 2025, you can contribute up to $4,300 with self-only health insurance coverage and $8,550 with family coverage (plus a $1,000 catch-up contribution for ages 55 and older). The HSA contribution limit increases for tax year 2026 to $4,400 with self-only health insurance coverage and $8,750 with family coverage. The catch-up contribution limit stays the same.

For tax year 2025, you can also contribute up to $7,000 (plus a $1,000 catch-up contribution for ages 50 and older) to an individual retirement account (IRA) until the filing deadline. The contribution limit increases to $7,500, and the catch-up limit increases to $1,100 for tax year 2026.

If you or your spouse is covered by a workplace retirement plan, your contributions to a traditional IRA may not be deductible. For tax year 2025, there’s an income-based phaseout starting at $89,000 for single filers and $146,000 when married filing jointly (MFJ). These limits increased for tax year 2026. However, you can still benefit from contributing to a Roth IRA.

If you’re self-employed or not covered by a retirement plan at work, this limit won’t apply to you. That said, you may be able to contribute to self-employed retirement plans with higher limits until the filing deadline, such as solo 401(k), SEP IRA, and Keogh plans. Just know that this can reduce your deduction for traditional IRA contributions.

Refund Drains High Earners Often Overlook

As a high earner, small mistakes can significantly drain your tax refund or increase your tax burden. Some of the most common pitfalls to avoid include:

• Timing capital gains realizations poorly: Selling appreciated assets in a year when your income is already high can push you into the 20% long-term capital gains tax bracket. For tax year 2025, that threshold starts at $533,401 in taxable income for single filers and $600,050 when married filing jointly. The threshold increases for tax year 2026.
• Under-withholding on supplemental wages: Income taxes on bonuses, equity payouts, and other supplemental wages are often withheld at a flat rate. If total supplemental wages are less than $1 million, the default rate is 22%, which can contribute to underpayment for high earners.

If you realize that these or other errors increased your 2025 tax liability enough that you underpaid, don’t wait until the filing deadline to act. Making an additional estimated tax payment can help reduce your penalties and interest.

The Bottom Line

Many TCJA provisions were set to expire at the end of 2025, but the OBBBA preserved much of the TCJA’s tax framework. It also introduced several new regulations that may affect 2025 returns. For high earners, the most notable change is the increased SALT deduction, which may make itemizing more attractive.

While the 2025 tax year has ended, you may still be able to reduce your tax liability with certain strategies, such as contributing to tax-advantaged accounts or making additional estimated tax payments. To inform your approach, assess your tax position under current tax laws and consider consulting a tax professional.