If you earn $250,000 or more per year, you’re likely paying more in taxes than necessary. The good news is that with proper tax planning, it’s possible to reduce your tax liability or even eliminate your annual tax bill altogether.
At 212 Tax & Accounting Services, our team provides expert tax planning and accounting solutions for individuals, families, and business owners in New York City and South Florida. While we help clients at all income levels, we also specialize in advanced tax strategies for high earners, self-employed professionals, and business owners making $250,000 or more per year. Whether you’re looking to reduce your tax liability, optimize your investments, or eliminate unnecessary taxes, we ensure you take advantage of every opportunity to maximize your savings.
Here are seven powerful tax-saving strategies that can help you keep more of what you earn. For more ways to reduce your tax burden, head over to our YouTube channel.
Maximize Retirement Contributions with a SEP IRA or Solo 401(k)
If you’re self-employed or a business owner, you don’t have access to a traditional employer-sponsored 401(k). Instead, the government provides alternatives like the SEP IRA and Solo 401(k), both of which allow for significant tax savings while building long-term financial security.
If you’re worried about not having enough cash to contribute before year-end, you still have time. You can contribute for the prior tax year until April 15th, and by filing a tax extension, you can extend the deadline to contribute until September or October. Business owners should take advantage of these extended deadlines to maximize deductions and keep more money in their pockets.
Proactive year-end tax planning ensures you don’t miss out on this major deduction while also securing your retirement.
Hire Your Kids to Reduce Taxes and Build Their Financial Future
If you own a business and have children, you can legally employ them to shift taxable income while funding their future.
When structured properly, wages paid to your child are a deductible business expense. That money can then be contributed to a Roth IRA or traditional IRA, allowing it to grow, potentially tax-free, for decades. This not only reduces your taxable income but also sets your child up for long-term financial security. Families can use this strategy to build generational wealth while benefiting from significant tax savings.
Before implementing this, check state labor laws regarding workers’ compensation, disability insurance, and minimum wage requirements to ensure compliance.
Utilize the Backdoor Roth IRA for Tax-Free Growth
If you make $250,000 or more, you’re likely not eligible to contribute to a Roth IRA due to income restrictions. However, a Backdoor Roth IRA allows high-income earners to still take advantage of tax-free growth.
This strategy involves contributing to a traditional IRA and then converting it into a Roth IRA. While the initial contribution isn’t tax-deductible, the growth inside the Roth IRA remains tax-free, and withdrawals in retirement won’t be taxed. This is an especially useful strategy for professionals and business owners where high state taxes make tax-free growth even more valuable.
By implementing this now, you can grow your investments tax-free for decades, potentially saving millions in future taxes.
Take Advantage of a 529 College Savings Plan
For familiestrying to save up for college, a 529 College Savings Plan provides a way to reduce taxable income while saving for your child’s education.
There’s no federal tax deduction for 529 contributions, but many states offer state tax deductions. Funds inside a 529 plan grow tax-free and can be withdrawn tax-free when used for qualified U.S.-based educational expenses. South Florida residents can still benefit from tax-free growth, even though they don’t file state income tax returns.
A recent law change now allows unused 529 funds to be rolled into a Roth IRA, eliminating concerns about losing money if a child decides not to attend college.
Use a Charitable LLC and Donor-Advised Fund for Tax Deductions
High earners looking for large tax deductions may benefit from setting up a Charitable LLC combined with a Donor-Advised Fund (DAF).
By donating money or assets to a Charitable LLC, you receive an immediate tax deduction. A Donor-Advised Fund allows you to manage and distribute those funds to charities over time, providing more flexibility than direct charitable contributions. This is particularly beneficial for high-net-worth individuals where state tax burdens can be significantly reduced with charitable planning.
This strategy also allows you to swap assets, such as life insurance policies or real estate, while still maintaining control over the funds.
Utilize Variable Universal Life (VUL) Insurance for Tax-Free Growth
A Variable Universal Life (VUL) Insurance Policy is a tax-free investment tool that allows high earners to grow wealth similar to a Roth IRA.
Contributions grow tax-free, and if structured properly, withdrawals can also be tax-free. This strategy provides not only a tax-free growth vehicle but also liquidity through policy loans, allowing you to borrow against your policy at low interest rates. Capital gains and other income taxes on investment income can be substantial, this strategy helps preserve wealth for high-income earners.
For high-income earners, VUL policies serve as both an investment tool and a long-term estate planning strategy.
Shelter Investments and Business Assets with Private Placement Life Insurance
If you make $250,000 or more per year, a Private Placement Life Insurance (PPLI) policy can be a powerful tax shelter.
PPLI allows you to place assets inside an insurance policy, shielding them from capital gains taxes. It’s especially beneficial if you own:
- A high-value business you plan to sell
- Significant investments in stocks, ETFs, or crypto
- Real estate or other appreciating assets
Work with a Tax Expert to Implement These Strategies
If you earn $250,000 or more per year, strategic tax planning can significantly reduce or even eliminate your tax bill, but navigating complex tax laws requires the right expertise.
At 212 Tax & Accounting Services, our team specializes in helping business owners, high earners, and families in New York Cityand South Florida maximize savings through advanced tax strategies. Whether you need retirement planning, tax-efficient investments, or business structuring, we ensure you’re taking full advantage of every opportunity.
Want to see how much you can save on taxes? We offer two types of consultations designed to help you stay compliant and maximize your savings. Head to 212tax.com to schedule your consultation today.
