Tax strategies for high earners and investors
Quick answer
The best tax strategy depends on the income you already have. W-2 earners start with withholding, pre-tax accounts and the short-term rental loophole. Business owners look at an S-corp election, retirement plans and the Augusta rule. Real estate investors pair cost segregation and bonus depreciation with REPS or the STR rules. Each guide below shows the math.
Where should I start?
Pick the line that describes most of your income. Read the guides in order.
If most of your income is a W-2 salary
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Tax strategies for W-2 employees
Withholding, pre-tax accounts and what still works at a high salary.
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The short-term rental loophole
The main way a W-2 household can use rental losses against wages.
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What makes the first-year loss large.
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What the loss costs on the day you sell.
If you own a business or earn 1099 income
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When the payroll tax saving beats the cost, and the Form 2553 deadline.
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Renting your home to your business for up to 14 days.
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Tax strategies for high-income earners
How the pieces fit once income passes the top brackets.
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100% first-year write-offs for business property.
If you invest in real estate or run an Airbnb
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The short-term rental loophole
The 7-day average stay and material participation tests.
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Real estate professional status
The 750-hour route for long-term rentals.
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Which test your household can pass.
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Moving parts of the building into short lives.
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Planning the sale before you buy.
The core guides
What is a deduction worth at my tax rate?
A deduction lowers taxable income. Its value is the deduction times your top federal rate. A credit lowers the tax itself. Here is a $10,000 deduction at each 2026 federal bracket that most readers of this page are in.
| Top federal rate | Value of a $10,000 deduction | Value of a $100,000 paper loss you can use |
|---|---|---|
| 22% | $2,200 | $22,000 |
| 24% | $2,400 | $24,000 |
| 32% | $3,200 | $32,000 |
| 35% | $3,500 | $35,000 |
| 37% | $3,700 | $37,000 |
State tax adds to these numbers, and a paper loss only helps if the rules let it offset your income. Find your own rate with the marginal vs effective tax rate calculator, or browse all the calculators.
What do real plans find?
Of the 61 anonymized wealth plans published on this site (inventory dated Sept 13, 2026), 30 state a headline dollar figure, most often a first-year tax saving estimate. The median of those figures is $43,500. They are plan estimates for each household's facts, not filed results, and the other 31 plans state no figure at all.
In an April 2026 video, Preston walks through one client case: a $320,000 W-2 household in New Jersey with two kids, where the plan found $22,400 a year. You can read the published plans on the wealth building hub.
Watch: the 2026 changes and a real client case
- The 2026 standard deduction is $16,100 single and $32,200 joint, now permanent.
- The SALT cap rose from $10,000 to $40,400 for 2026, and it shrinks for income over $505,000.
- The 401(k) limit is $24,500, with an $8,000 catch-up at 50 and more at ages 60 to 63.
- The 20% QBI deduction is permanent, and 100% bonus depreciation is permanent for property acquired after Jan. 19, 2025.
- The client: $320,000 of W-2 income, married with two kids, in New Jersey. The plan found $22,400 a year.
- The SALT cap phases out above about $505,000 of income. A pass-through entity tax election can work around it for business owners and must be made in advance.
- A second client, a $280,000 software engineer, used a $450,000 rental, cost segregation and a spouse with real estate professional status for a $105,000 first-year loss.
- The common mistake: waiting until filing season. Planning has to happen during the year.
Top articles by topic
Real estate and short-term rentals
- How cost segregation helps with taxes
- Bonus depreciation on residential rental property
- Residential rental property depreciation
- Capital gains tax: what you owe when you sell
W-2 earners
- How to cut taxes on a $300K W-2 without starting a business
- W-2 tax strategies after you max your 401(k) and HSA
- Best tax deductions for W-2 employees
- Tax strategy programs for W-2 earners over $250K
Business owners and high earners
- The Augusta rule and Section 280A
- Home office deduction: the 2026 guide
- Best tax deductions for high-income earners
- Money moves your CPA never mentioned
The 2026 law changes
Guides by situation
A deduction that transforms a rental owner's return does nothing for a salaried employee with no property. These pages sequence the strategies for one kind of earner.
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Tax strategies for salaried workers looking to reduce their tax burden.
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Maximize deductions and retirement savings for independent workers.
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Advanced strategies for rental property owners and flippers.
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Airbnb and short-term rental hosts
Specific tax benefits for short-term rental operators.
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Strategies for those in the highest tax brackets.
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Tax optimization for entrepreneurs and company owners.
Real estate
Depreciation, deferral, and the participation tests that decide whether a rental loss is usable this year.
| Strategy | What it does | Level |
|---|---|---|
| Cost segregation | Reclassifies building components into shorter depreciation lives so deductions land in the early years. | advanced |
| Bonus depreciation | Deducts a large share of qualifying property costs in the first year instead of over its useful life. | intermediate |
| Rental property depreciation | Deducts a rental building over 27.5 years and tracks the basis that matters at sale. | beginner |
| Real estate professional status | Removes the passive loss limit so rental losses can offset ordinary income. | advanced |
| REPS vs the STR loophole | The 750-hour and more-than-half tests next to the seven-day average and the 100-hour test, and which one a W-2 earner can meet. | advanced |
| Short-term rental loophole | Deducts short-term rental losses against W-2 income when average stays are seven days or less and you materially participate. | intermediate |
| Depreciation recapture on a short-term rental | What the loophole costs on the day you sell: Section 1250 gain at up to 25 percent and Section 1245 recapture at ordinary rates. | advanced |
| 1031 exchange | Defers capital gains tax when sale proceeds are reinvested in like-kind property. | advanced |
| Installment sale | Spreads the gain on a sale across the years the payments are actually received. | intermediate |
| Opportunity zone investing | Defers and reduces capital gains reinvested in designated communities. | advanced |
| Qualified opportunity zone funds | Holds opportunity zone investments through a fund that has to meet asset and improvement tests. | advanced |
| Primary residence gain exclusion | Excludes up to $250,000 of gain, or $500,000 filing jointly, on the sale of a main home under Section 121. | beginner |
Business and entity
Entity choice, owner compensation, equipment, and the deductions that only exist once there is a business.
| Strategy | What it does | Level |
|---|---|---|
| S-corp election | Splits owner pay between salary and distributions to cut self-employment tax. | intermediate |
| Qualified business income deduction | Deducts up to 20% of qualified pass-through business income. | intermediate |
| Section 179 expensing | Expenses qualifying equipment in the year it is placed in service instead of depreciating it. | beginner |
| Business vehicle deduction | Deducts vehicle costs through Section 179, standard mileage, or the actual expense method. | intermediate |
| Home office deduction | Deducts the business-use share of your home under the simplified or actual expense method. | beginner |
| Augusta rule | Rents your home to your business for up to 14 days a year without reporting the rent as income. | intermediate |
| Hiring your children | Puts family members on payroll for real work, moving income into a lower bracket. | intermediate |
| Pass-through entity tax | Pays state tax at the entity level so the deduction survives the federal SALT cap. | intermediate |
| Captive insurance | Forms a licensed insurance company to cover real business risks and deduct the premiums. | advanced |
Retirement and benefit accounts
Contribution ceilings, conversions, and the accounts that shelter growth rather than a single year of income.
| Strategy | What it does | Level |
|---|---|---|
| Solo 401(k) | Combines employee deferrals and employer contributions for an owner-only business. | intermediate |
| Health savings account | Contributions, growth, and qualified medical withdrawals all escape tax. | beginner |
| Dependent care FSA | Pays childcare and dependent care costs with pre-tax payroll dollars. | beginner |
| Backdoor Roth IRA | Reaches a Roth IRA through a non-deductible contribution and conversion when income exceeds the Roth limits. | intermediate |
| Mega backdoor Roth | Uses after-tax 401(k) contributions and in-plan conversion to add Roth dollars above the deferral limit. | advanced |
| Roth conversion ladder | Converts traditional balances in planned yearly slices to control the bracket and open penalty-free access. | intermediate |
| Self-directed IRA | Holds real estate, private companies, and other alternative assets inside a retirement account. | advanced |
| Net unrealized appreciation | Moves employer stock out of a 401(k) so the appreciation is taxed at capital gains rates. | advanced |
Investments and capital gains
Timing realized gains and losses in a taxable brokerage account.
| Strategy | What it does | Level |
|---|---|---|
| Tax loss harvesting | Sells losing positions to offset realized gains while respecting the wash-sale rule. | beginner |
| Tax gain harvesting | Realizes gains deliberately in a low-income year to reset basis at the 0% or 15% rate. | intermediate |
| Qualified small business stock | Excludes gain on qualifying C corporation stock under Section 1202, in full after five years and in part after three for stock issued after July 4, 2025. | advanced |
Charitable giving
Two structures that separate the year of the deduction from the year the money reaches a charity.
| Strategy | What it does | Level |
|---|---|---|
| Donor-advised fund | Takes the charitable deduction in the year the account is funded and grants the money out later. | intermediate |
| Charitable remainder trust | Converts an appreciated asset into lifetime income with a current deduction and deferred gain. | advanced |
Timing, residency, and family
Moves that change when income is taxed, where it is taxed, or who reports it.
| Strategy | What it does | Level |
|---|---|---|
| Bunching deductions | Concentrates two years of charitable gifts and other itemized deductions into one year to clear the standard deduction. | beginner |
| Estimated tax payments | Times quarterly payments and safe-harbor amounts so you avoid underpayment penalties. | beginner |
| Income shifting | Moves income to family members or entities taxed at lower rates. | intermediate |
| State tax residency | Establishes domicile and day-count evidence before changing the state that taxes your income. | advanced |
Retirement plan guides
Five plan guides sit alongside the strategies above. They cover contribution ceilings, deadlines, and who each plan fits.
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Which contribution type fits your current and expected bracket.
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401(k) contribution strategies
Capturing the full employer match, catch-up contributions, and deferral order.
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A high-ceiling, low-paperwork plan for self-employed income.
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A small-business plan with mandatory employer contributions and lighter administration.
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The largest deductible contributions available to a stable, high-income owner.
Videos on this topic
- Three 2026 tax law changes that saved a client $22,400 a year (10 min)
- 2026 tax changes for people earning $100K or more (9 min)
- 9 tax strategies high earners use to keep more money (7 min)
Common questions
Which strategy should I implement first?
Start with the one that fits the income you already have. A rental owner usually gets the largest first-year move from cost segregation combined with bonus depreciation. A W-2 employee with no property gets further with an HSA, bunching deductions, or the short-term rental loophole if a property is already in the plan.
What changed for 2026?
The 2025 law (OBBBA) made several rules permanent. 100% bonus depreciation is back for property acquired after Jan. 19, 2025. The 20% QBI deduction is permanent with a wider phase-in range. The SALT cap rose from $10,000 to $40,400 for 2026, reduced above $505,000 of income. The 401(k) limit for 2026 is $24,500. Each guide notes its own changes.
Do I need a CPA to implement these strategies?
Some are self-service: HSA contributions, a solo 401(k), tracking mileage. Others are not. A cost segregation study has to be produced by qualified engineers, a 1031 exchange needs a qualified intermediary before closing, and real estate professional status stands or falls on contemporaneous time logs a CPA should review.
Can I use several strategies at once?
Yes, and most plans do. Cost segregation and bonus depreciation work on the same property. A solo 401(k) and an HSA sit alongside an S-corp election. The constraint is interaction: a deduction that lowers wages can shrink a retirement contribution limit, and passive losses only help if you clear the participation tests.
What is the difference between a deduction and a credit?
A deduction reduces taxable income, so its value is the deduction multiplied by your marginal rate. In the 24% bracket a $10,000 deduction saves $2,400. A credit reduces the tax itself, so a $10,000 credit saves $10,000. Almost everything on this page is a deduction or a deferral rather than a credit.
How much can these strategies actually save?
It depends on your marginal rate, your income type, and whether the facts support the strategy before you file. The savings figures on each page are worked examples with their assumptions written out. Run the same math with your own numbers rather than with the example.
Sources
- IRS, Rev. Proc. 2025-32 (2026 inflation amounts)
- IRS, guidance on 100% bonus depreciation after OBBBA
- IRS Publication 925, Passive Activity and At-Risk Rules
- IRS Publication 527, Residential Rental Property
- IRS Publication 544, Sales and Other Dispositions of Assets
- IRS, 401(k) limit increases to $24,500 for 2026
Who writes these guides
The guides are written by Preston Seo, founder of Legacy Investing Show. Preston has owned rental property since 2018 and teaches tax strategy to W-2 earners, business owners and investors. He is not a CPA or attorney. Each guide lists its IRS sources and the date it was last reviewed.
Learn the full tax playbook
The free tax strategies masterclass shows how these strategies fit together for high earners, business owners and real estate investors.
Educational content only. It is not individual tax, legal, or investment advice.