Oct 20, 2026

I'm a Wealth Advisor: Here's How My High-Earning Clients Lower Their Taxable Income

High earners rarely fix their tax picture with one smart move (that the rest of us don’t know about).

James Kratochvil, partner and wealth management advisor at Northwestern Mutual's Flywheel Financial, along with Jeffrey Goodrich, wealth advisor at JCG Private Wealth Management and professor with UCLA's Financial Management Program, both shared their insights.

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Read on to find out how their clients treat tax reduction as a whole system rather than just a single decision.

1. Max Out Every Tax-Advantaged Account Available

"One of the first areas I review with high-earning clients is whether they are fully utilizing the tax-advantaged accounts available to them," Kratochvil said. He pointed to workplace retirement plans, health savings accounts (HSAs) and other retirement vehicles depending on the client's situation.

"For clients in higher tax brackets, maximizing these opportunities can help reduce taxable income today while also supporting long-term retirement and wealth-building goals," Kratochvil added.

Goodrich's clients go further with the contribution ceilings themselves. He said they often do annual gifting of $19,000 per person or $38,000 with gift splitting between spouses, along with a lifetime exemption of $15 million. Many contribute $95,000 to super funds and fund 529 plans for children or grandchildren.

2. Control the Timing of When Income Shows Up

High earners rarely live on just salary and Kratochvil said that flexibility creates planning opportunities many of us never use. "High earners often have more than a traditional salary to consider, including bonuses, equity compensation, business income or investment gains," he said. "When there is flexibility around the timing of income, we look at the client's full financial picture and whether it makes sense to accelerate or defer certain income or deductions."

The goal is to manage exposure across many years at the same time.

3. Use Investment Losses on Purpose

Tax-loss harvesting shows up in both advisors' strategies, with a shared warning attached. "For clients with substantial taxable investment portfolios, tax-loss harvesting can be an important planning tool," Kratochvil said. Selling declining investments can offset realized gains and sometimes a portion of ordinary income.

"I generally caution against letting the tax benefit drive the investment decision,” Kratochvil added. “Any transaction should still make sense within the client's overall investment strategy, risk tolerance and long-term goals."

4. Rethink How Charitable Giving Gets Structured

Most high-earning clients already donate. The real opportunity, according to Kratochvil, is in how they do it. "Many of my high-earning clients are already giving to organizations and causes they care about, so the conversation often becomes about how they give rather than whether they give," he said. Donating appreciated securities or using a donor-advised fund can support the same causes while adding real tax efficiency.

Goodrich's wealthiest clients often set up private foundations, which gives them more direct control over where the money ultimately goes.

5. Know Which Strategies Get Skipped and Why

According to Goodrich, clients with qualified retirement funds under $1 million frequently use a Roth IRA conversion. Those above $1 million often skip it entirely, since they don't expect their future tax rate to be high enough to justify converting now.

HSAs get avoided too, mainly because they require a high-deductible health plan that some high earners don't like. Small business owners often skip deferred compensation plans because they can't deduct the funds they defer into the plan.

6. Learn the Difference Between W-2 Earners and Business Owners

The planning approach can change depending on how income arrives. Goodrich said many high-net-worth individuals try to minimize payroll taxes, believing they won’t get much benefit out of Social Security. Business owners and self-employed clients often like to take their income through a K-1, thinking it reduces payroll tax exposure.

The reality is just a bit more complicated. "The IRS expects an individual to have a certain amount of W-2 income, which helps fund payroll taxes," Goodrich said. He also noted that some business owners underfund employee benefits specifically to avoid the added cost, a decision with its own downstream consequences.

7. Coordinate Every Advisor on the Same Plan

For executives and business owners, Kratochvil said the real planning extends well past the investment portfolio. "Compensation structure, business income, retirement plan design and the timing of major financial decisions can all affect taxable income," he said. These clients tend to benefit most when their financial advisor, certified public accountant (CPA) and other professionals are working from the same plan rather than addressing each decision in isolation.

8. Don't Optimize for This Year Alone

"One of the biggest mistakes I see high earners make is focusing only on reducing taxes today," Kratochvil said. "A strategy that lowers taxable income this year is not necessarily the best decision if it creates a larger tax burden later or works against another financial goal." He weighs every move against retirement, investments, estate planning and liquidity together rather than in isolation.

9. Make This One Move Before December 31

Goodrich shared that business owners should consider placing new equipment in service before the deadline to capture available deductions. For individuals, the simplest move is checking withholding and estimated tax payments before the year closes, rather than discovering a shortfall in April.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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Written by

Laura Beck

Edited by

Rebekah Evans