Do You Have A Tax Strategy?

Most people who earn good money do not have a tax strategy. They have a tax appointment.

The appointment happens in March or April after the end of the tax year. It involves uploading a series of documents to someone who charges by the hour, and ends with a number you either celebrate or quietly resent. The strategy happens during the tax year itself. When you're deciding whether to exercise those stock options, or sell that position, or structure that bonus, or max out that account. By the time you're sitting across from your CPA in the spring, the game is largely over. You're not planning anymore. You're just scoring.

The tax code is more negotiable than most people realize. It's full of elections, thresholds, and timing mechanisms built for people who engage before year-end. Most high earners never find them. They file accurately, assume that's sufficient, and move on. It isn't.

The gap between planning and filing materializes in predictable places...

Where is the opportunity? Assume, you are a high-income professional in Manhattan and your top marginal federal rate is 37%. If you add New York State at 10.9%, add New York City at 3.876%, then you are looking at a marginal rate somewhere north of 50% on ordinary income. On the next dollar earned above certain thresholds, the government takes more than you keep. This is precisely why having no strategy is not a neutral position. It's an expensive one.

The first category of high earner who gets hurt the worst is the tech professional with equity compensation.

Restricted stock units vest, hit your W-2 as ordinary income, and are taxed immediately at whatever your marginal rate happens to be that year. If you have a good year, a large vest, and a signing bonus all landing simultaneously, the effective tax rate on that equity can be brutal. The question nobody asks in advance is: can I control when this income lands? Sometimes no. Often, more than you'd think.

Incentive stock options are a different animal. The spread between the strike price and fair market value at exercise triggers the alternative minimum tax, which is its own parallel universe of calculation that has surprised more than a few people who thought they understood their tax situation. Exercising ISOs carelessly, without modeling the AMT exposure, is one of the more common expensive mistakes I see among people who are otherwise financially sophisticated.

Non-qualified stock options are simpler but not friendlier: the spread at exercise is ordinary income, full stop. The strategy question is not just "should I exercise" but "in what year, and how does that interact with everything else on my return."

None of this is taught at the company all-hands. The equity FAQ on your HR portal will not tell you any of it.

The second category is the business owner or freelancer who has been treating their entity structure as an afterthought.

S-corporations, partnerships, and sole proprietorships all generate self-employment income and interact with the tax code differently. The qualified business income deduction under Section 199A can be worth up to 20% of eligible income for certain business owners, which is substantial. Whether you qualify, and by how much, depends on your income level, the nature of your business, and how your entity is structured. There are phase-outs. There are specified service trade exclusions. It is not simple, but the savings for someone who qualifies and actually claims it are real.

Similarly, a solo 401(k) for a self-employed person allows contributions that can run to $72,000 in 2026, depending on income. A SEP-IRA allows up to 20% of net self-employment income (or 25% of W-2 Compensation), to the same limit. Most freelancers I encounter are aware these accounts exist. Far fewer have modeled their exact contribution ceiling, coordinated it with a day job retirement account if they have one, or thought about whether a defined benefit plan might be worth modeling at much higher income levels.

There's a broader principle underneath all of this, and it's the one that distinguishes tax planning from tax filing.

Tax filing is about accuracy. You're reporting what happened. Tax planning is about optionality. You're making decisions now that shape what will happen later and what the tax consequences of that will be. The two activities require entirely different mindsets, and they happen at entirely different points in the calendar year.

A real tax strategy has some version of the following components: a projection of your taxable income before year-end, a review of available deductions you haven't yet deployed, a look at any investment positions where harvesting losses makes sense, a check on retirement account contributions and whether you've maximized them, and some forward modeling of events on the horizon, whether that's a large equity vest, a business sale, an inheritance, or a property transaction.

For a business owner there are several components that look nothing like what a W-2 employee needs to worry about. It starts with a taxable income projection before year-end (not in April), but in October or November, when you still have time to act on what you find. If net income is running higher than expected, that's not just good news. It's a decision point. How much of that income can be deferred or timed differently before December 31?

Retirement contributions are the most obvious lever. A solo 401(k) can absorb up to $72,000 in 2026 between employee deferrals and employer contributions, depending on net self-employment income. A defined benefit plan can go substantially higher for owners in their 50s with the income to support it. Neither does anything for you if you haven't modeled the ceiling specific to your situation, coordinated it with any other retirement accounts in your household, or set it up before the deadline.

Bonus depreciation is the one most business owners either underuse or mistime. For qualifying asset purchases (equipment, machinery, certain software, vehicles used for business) bonus depreciation has historically allowed immediate expensing of a large percentage of the cost rather than depreciating it over years. Section 179 expensing runs parallel to this and has its own rules and limits, and the two interact in ways that warrant actual modeling rather than assumptions.

The QBI deduction under Section 199A is where a lot of business owners quietly leave money on the table. At lower income levels, it's relatively straightforward: up to 20% of qualified business income is deductible. At higher income levels, phase-outs kick in based on taxable income, and for owners in specified service trades (law, consulting, financial services, health). The deduction begins to disappear entirely above certain thresholds.

Beyond those, a complete picture also includes a review of deductions not yet deployed (home office, vehicle mileage, health insurance premiums for self-employed owners, retirement plan contributions for any employees), a look at investment positions where harvesting losses can offset business income or capital gains, and some forward modeling of anything large on the horizon. A business sale, a real estate transaction, an inheritance, a major equipment purchase, all of these have tax consequences that are far more manageable when you see them coming than when you're reconstructing them after the fact.

The common thread is that none of this works in April. The decisions that shape your tax bill for a given year are almost entirely made before December 31 of that year. Your CPA can document what happened. Only planning can change it.

The one thing worth pushing back on, directly, is the assumption that your accountant is handling this proactively.

Many CPAs are excellent at what they are primarily trained and paid to do, which is compliance. Filing an accurate return. That is valuable work. What it is not, by default, is forward-looking tax planning. The incentive structure of traditional tax preparation does not naturally generate that service. You get the return filed, you pay the fee, and you schedule next year's appointment.

If you've never had a conversation with your tax professional in October or November, if nobody has ever proactively called you to talk about a vest date or a Roth conversion window or a loss harvesting opportunity, that tells you something about what kind of service you're actually receiving. Which might be fine. It might also be costing you more than you realize.

The question worth asking, right now, is not "did I file correctly last year." It's "am I making decisions today that I'll regret come April."

Those are very different questions. And only one of them has any leverage left in it.