{"id":353968,"date":"2016-04-04T10:48:03","date_gmt":"2016-04-04T15:48:03","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/tax\/federal-taxes\/ten-ways-to-lower-your-taxes.html"},"modified":"2026-06-29T10:45:06","modified_gmt":"2026-06-29T15:45:06","slug":"ten-ways-to-lower-your-taxes","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/tax\/federal-taxes\/ten-ways-to-lower-your-taxes.html","title":{"rendered":"Advanced Tax Reduction Strategies: A Guide for High-Earners and Business Owners"},"content":{"rendered":"\n
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Advanced Tax Reduction Strategies: A Guide for High-Earners and Business Owners<\/h1>\n\n
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\n By J.P. Finet, J.D.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

High-income<\/span> taxpayers<\/span> can use tax-reduction strategies such as specialized investments, deductions, and credits to legally reduce their tax liabilities<\/span>. Consulting a tax attorney ensures tax savings<\/span> while complying with the latest federal laws.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

The tax code provides simplified options for low and middle-income taxpayers<\/span> to reduce their tax bills<\/span> while saving for the future. Many of the most commonly used tax-advantaged<\/span> savings options, such as traditional IRAs<\/span> and 401(k)s, are either unavailable to high-income<\/span> taxpayers<\/span> or have annual contribution limits<\/span>. As a result, high-income<\/span> individuals and the owners of successful businesses often need to look to other options to both reduce their tax bills<\/span> and pursue tax-advantaged<\/span> investments.<\/p>\n

There is a broad range of tax-advantaged investment options\u00a0for high earners. The ones that may work best for you will depend on such factors as your income, tax situation<\/span>, and long-term savings goals. Tax planning<\/span> must also account for recent changes to tax law<\/span> under the 2017 Tax Cuts<\/span> and Jobs Act (TCJA) and the 2025 One Big Beautiful Bill Act (OBBBA). Both pieces of legislation made changes to the tax code that created tax benefits<\/span>\u00a0for certain\u00a0high-income<\/span>\u00a0individuals, but they also rendered some older tax strategies<\/span> ineffective.<\/p>\n

In the sections that follow, we\u2019ll examine some of the most popular tax-savings<\/span> strategies utilized by high-income<\/span> individuals and business owners, and assess the situations in which they are most effective. Since some strategies will only benefit\u00a0taxpayers<\/span>\u00a0in specific situations\u00a0or could result in higher\u00a0tax bills<\/span>\u00a0if used incorrectly, consulting a tax attorney<\/a> to ensure the chosen strategy has its intended effect is a wise option.<\/p>\n

Tax-Free<\/span> Investments<\/strong><\/h2>\n

Sometimes the easiest way to reduce your tax bill<\/span> is to ensure your income is not subject to tax in the first place. The tax code encourages some types of investments by either minimizing or eliminating taxes on them. The most common way to do this is through investments in municipal or treasury bonds, or mutual funds that invest in these bonds.<\/p>\n

The income earned on municipal bonds is usually exempt from federal tax. In addition, investments in in-state municipal bonds may be exempt from state taxes<\/span>. Income earned from U.S. Treasury bonds is also often exempt from state taxes<\/span>. While the yields on these bonds may be lower than those on corporate bonds or stock investments, the\u00a0tax savings<\/span>\u00a0often offset the lower income. Many investors turn to municipal and Treasury bonds for their tax benefits<\/span>, but they also offer the advantage of being a dependable source of income that is not subject to the same fluctuations as the stock market.<\/p>\n

\u201cMega\u201d Backdoor Roth IRA<\/span> Conversion<\/strong><\/h2>\n

The advantage of a Roth IRA<\/span> is that the IRA contributions<\/span> are made with after-tax<\/span> income, and withdrawals<\/span> of contributions or investment income from the account can be made tax-free<\/span> if the account holder is older than 59 \u00bd. This is often a great deal for investors who either expect to be in a higher tax bracket<\/span> when they reach retirement age or have after-tax<\/span> income they would like to grow tax-free<\/span>. However, investors with 2026 incomes of $168,000 ($252,000 for married filing jointly) can\u2019t contribute to Roth IRAs<\/span>.<\/p>\n

High-income<\/span> individuals can sometimes avoid the income cap by making after-tax<\/span> 401(k) contributions to their workplace plans (contributions are normally made pre-tax<\/span>). The mega backdoor Roth conversion<\/span> takes advantage of the fact that the annual tax-free<\/span> 401(k) contribution limit<\/span> is significantly lower than the total contribution limit<\/span>. For 2026, the pre-tax<\/span> contribution limit<\/span> is $24,500 ($32,500 for ages 50 and over), and the total contribution limit<\/span> for 401(k) plans is $72,000 ($80,000 for ages 50 and over).<\/p>\n

Using the mega backdoor IRA strategy, an individual can contribute $72,000 to their 401(k) for 2026, even though only $24,500 of that amount is tax-free<\/span>. The taxpayer<\/span> pays tax on $47,500 (the $72,000 total contribution minus the $24,500 tax-free<\/span> portion) and then rolls the $47,500 into a Roth IRA<\/span>. While they may be making too much to contribute directly to a Roth IRA<\/span>, this strategy is acceptable to the IRS<\/span> and allows that $47,500 to grow tax-free<\/span>.<\/p>\n

Not all 401(k) plans allow for this type of distribution. It\u2019s a good idea to consult a tax lawyer<\/a> to be sure your plan allows this before implementing it.<\/p>\n

Maximized Tax Deductions<\/span><\/strong><\/h2>\n

The tax benefits<\/span> of itemized deductions<\/span> are usually fairly straightforward. High-income<\/span> taxpayers<\/span> can sometimes\u00a0use them to increase their impact. Let\u2019s examine a couple of them:<\/p>\n