Now is a good time to assess your tax situation and adjust your 2026 strategy as needed!

High-income earners can (and should) make proactive decisions that either reduce taxable income today and/or create tax flexibility in future years.

Here are 3 key strategies high earning taxpayers might consider this year:

1. Maximize All Tax-Advantaged Accounts

This one move could produce the greatest benefit (relative to effort and cost) for most high earners.

For 2026, the 401(k) contribution limit increased to $24,500, and IRA limits increased to $7,500. HSA contribution limits also increased. High-income taxpayers should evaluate every available tax-favored account, including:

• Traditional 401(k) or 403(b)
• HSA (if eligible)
• Backdoor Roth IRA
• Mega Backdoor Roth (if employer plan permits)
• SEP IRA, Solo 401(k), or Cash Balance Plan for business owners

Many people focus only on their 401(k), which can leave meaningful tax savings on the table. Business owners may be able to shelter significantly more income through a strategically designed retirement plan. Click here to learn more about options available through our affiliated and separately registered entity, Copper Leaf Financial.

Why it matters: Every dollar contributed to a pre-tax retirement account can reduce current taxable income while building long-term wealth!

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2. Build a Capital Gains and Investment Income Strategy Before Year-End

Many affluent taxpayers are surprised to learn that investment income can drive their tax bill more than earned income.

We recommend that our clients review these things PRIOR to December 31 every year:

• Unrealized capital gains
• Tax-loss harvesting opportunities
• Mutual fund capital gain distributions
• Concentrated stock positions
• Timing of large asset sales

High-income taxpayers may also be subject to the Net Investment Income Tax (NIIT), which makes investment planning even more important. Coordinating gains and losses can materially reduce federal tax liability. (Kiplinger)

Why it matters: A well-managed portfolio can often save more in taxes than an additional deduction.

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3. Create a Multi-Year Tax Projection (Not Just a 2026 Tax Return Projection)

This is a key planning strategy that tends to be something many taxpayers overlook.

Instead of asking, “How do I reduce my 2026 taxes?” ask: “How do I pay the least tax over the next 5-10 years?”

For example:

• Roth conversions may make sense in lower-income years.
• Business owners may be able to shift income between years.
• Retirees can manage future Required Minimum Distributions (RMDs).
• Charitable giving can be “bunched” into high-income years.
• High earners nearing retirement can position assets for lower future tax rates.

The most effective tax planning often involves intentionally recognizing some income today to avoid much larger tax bills later. (Investopedia)

Why it matters: Strategic tax planning is usually about managing tax brackets over multiple years rather than maximizing deductions in a single year.

Tax strategizing is very personal and dependent on each person’s evolving life circumstances. There are many considerations that should guide your tax strategy so contact us today to schedule a strategy session.

Recipients should not act on the information presented without seeking prior professional advice. Additional guidance may be obtained by contacting Davis & Hodgdon at 802-878-1963.