High-Income Earners: 8 Tax Moves to Consider Before Filing 2026 Returns
Higher income creates higher tax obligations, but it also creates more opportunities to implement strategies that legally reduce what you owe. For taxpayers filing 2025 returns in 2026, several planning approaches are particularly relevant, especially in the context of recent legislative changes and evolving rules around investment income, retirement accounts, and alternative minimum tax exposure. This guide outlines eight key moves that high-income earners should consider before filing.[1][2]
1. Maximize Retirement Contributions
Contributing the maximum allowed to tax-deferred retirement accounts reduces taxable income dollar-for-dollar. For 2025, the 401(k) contribution limit is $23,500, plus a $7,500 catch-up contribution for those 50 and older. If you are self-employed, a SEP-IRA allows contributions of up to 25 percent of net self-employment income, up to $70,000 for 2025. High earners who have not maximized their 2025 contributions can still make IRA contributions until April 15, 2026.[1][2]
2. Evaluate Roth Conversion Opportunities
If your income is temporarily lower than usual due to a job change, business loss, or other factors, converting a portion of a traditional IRA to a Roth IRA may be advantageous. The converted amount is taxable in the year of conversion, but future Roth distributions are tax-free. For high earners in high-income years, Roth conversions are generally not beneficial, but during transitional years, the math can favor conversion.[1][3]
3. Harvest Tax Losses
If you have unrealized losses in a taxable investment account, selling those positions before year-end or before filing allows you to realize the losses and offset capital gains from other sales. If losses exceed gains, up to $3,000 of excess losses can offset ordinary income, with the remainder carried forward to future years. This strategy, known as tax-loss harvesting, is most effective when implemented during the tax year, not at filing time, but reviewing positions before the deadline can still inform strategy for the following year.[2][3]
4. Review Net Investment Income Tax Exposure
The net investment income tax imposes an additional 3.8 percent tax on investment income for individuals with modified adjusted gross income above $200,000 (single) or $250,000 (married filing jointly). Investment income subject to this tax includes dividends, interest, capital gains, rental income, and passive business income. High earners should calculate their NIIT exposure and consider strategies to manage it, such as contributing to tax-deferred accounts to reduce MAGI.[1][2]
5. Evaluate Qualified Business Income Deduction Eligibility
Self-employed individuals and owners of pass-through entities such as S-corporations and partnerships may qualify for the qualified business income deduction, which allows a deduction of up to 20 percent of qualifying business income. For high-income taxpayers, the deduction is subject to wage and property limitations and is phased out or disallowed for certain service businesses above income thresholds. Reviewing your QBI deduction eligibility with a tax professional can identify planning opportunities.[1][3]
6. Utilize Donor-Advised Funds for Charitable Giving
A donor-advised fund allows you to make a large charitable contribution in a single year, claim the full deduction in that year, and then distribute the funds to specific charities over time. This bunching strategy is particularly effective for high-income years when your itemized deductions are already above the standard deduction threshold. Contributions of appreciated securities to a donor-advised fund avoid capital gains tax on the appreciation while generating a full fair market value deduction.[2][3]
7. Review Alternative Minimum Tax Exposure
The alternative minimum tax is a parallel tax system that limits certain deductions and imposes a flat rate on income above the AMT exemption. For 2025, the AMT exemption is $88,100 for single filers and $137,000 for married couples, with a phase-out beginning at higher income levels. High earners who exercise incentive stock options, have large deductions for SALT, or have significant miscellaneous deductions should calculate their AMT liability to avoid surprises.[1][2]
8. Consider Timing of Income and Deductions
If you have control over when you receive income or pay deductible expenses, timing decisions can shift taxable income between years. Accelerating deductible expenses into 2025 if you expect higher income in 2026, or deferring bonuses and other discretionary income into a lower-income year, can reduce your overall tax burden. This is most applicable to self-employed individuals and business owners with flexibility over invoicing and payment timing.[2][3]
Conclusion
High-income earners face higher marginal tax rates but also have access to more planning strategies that can meaningfully reduce what they owe. The eight moves outlined here, ranging from retirement maximization to NIIT management to charitable strategies, are worth reviewing with a qualified tax advisor who can evaluate how each applies to your specific income, investments, and business interests before your 2025 return is filed.[1][2][3]
Sources
[1] IRS, Additional Medicare Tax, IRS.gov/taxtopics/tc751
[2] IRS Publication 946, How to Depreciate Property, IRS.gov
[3] Fidelity Investments, Tax Planning for High Earners, fidelity.com
