Tax planning
Tax Planning for High-Income Earners: Strategies Beyond the Basics
By Matt Hightower · August 19, 2026
Equity compensation
RSU Withholding Gaps and the Supplemental Tax Bill
When restricted stock units vest, the value is treated as ordinary income, and employers generally withhold federal tax on that income at a flat supplemental-wage rate of 22% for amounts up to $1 million in a calendar year, and 37% on amounts above that threshold, under IRS rules for supplemental wages (see IRS Publication 15).
For many high earners, that flat rate falls well short of the marginal rate that actually applies. If your household income already sits in the 32% or 37% federal bracket, salary plus a large RSU vest can push much of that vest into a bracket the 22% withholding was never designed to cover. The gap between what is withheld and what is ultimately owed shows up as a bill at filing, often larger than expected.
Because the gap compounds with every vest date, estimating it early, rather than waiting until tax season, may help you avoid an April surprise. Adjusting W-4 withholding, making a quarterly estimated payment, or planning a partial sale at vest are all ways households address the shortfall once they know its size. The RSU Tax Gap Calculator walks through the math using your own vest schedule and income, so you can see roughly how large the gap is before it becomes a surprise.
Deferred compensation
Deferred Compensation Elections
Many executives and physicians have access to a nonqualified deferred compensation (NQDC) plan, which allows a portion of salary or bonus to be deferred to a future year rather than received and taxed today. Deferring income may lower your tax liability in the year you earn it, since the deferred amount is not included in that year's taxable income.
That benefit comes with a trade-off worth understanding before electing to defer. Unlike a 401(k), amounts deferred into an NQDC plan are typically unsecured: they remain part of the employer's general assets and are subject to the claims of the employer's creditors if the company runs into financial trouble. Deferring compensation is, in part, a bet on the employer's long-term financial health.
Election windows for these plans are typically set once a year and are irrevocable once made. Missing the window generally means waiting for the next enrollment period, and reversing a decision mid-year is usually not an option. Whether deferring makes sense may depend on your expected tax bracket in the deferral and distribution years, your view of the employer's financial stability, and how much of your net worth is already tied to that employer through equity compensation.
Charitable giving
Charitable Bunching and Donor-Advised Funds
Charitable bunching is the practice of combining several years of planned charitable giving into a single tax year, so that itemized deductions for that year exceed the standard deduction, rather than spreading the same giving evenly across years where it may not clear that threshold at all. For a household whose itemized deductions, mortgage interest, state and local taxes, and charitable gifts hover near the standard deduction line, bunching may allow a meaningful deduction in the bunched year.
A donor-advised fund (DAF) is one common way to bunch giving without changing the pace of distributions to the charities you support. Contributing several years' worth of intended giving to a DAF in one year could generate the itemized deduction that year, while the fund itself distributes grants to charities on whatever schedule you choose, over as many years as you like.
This strategy tends to matter most for households whose deductions sit close to the standard deduction line. Households with substantially higher itemized deductions, or whose giving is small relative to the standard deduction, may see a smaller benefit, which is why it is worth modeling against your own return rather than assumed.
Investment tax management
Tax-Loss Harvesting
Tax-loss harvesting is the practice of selling an investment at a loss to offset capital gains realized elsewhere in a portfolio, and up to $3,000 of ordinary income per year if losses exceed gains, with any unused loss carried forward to future years. For a high-income household with realized gains from equity compensation, a business sale, or an actively managed account, harvesting losses could meaningfully reduce the tax owed on those gains.
The wash-sale rule limits how this works in practice: if you sell a security at a loss and buy the same or a substantially identical security within 30 days before or after the sale, the loss is disallowed for tax purposes. Reinvesting the proceeds in a similar, but not identical, holding is one way investors try to stay invested in the same market segment while respecting the rule.
Tax-loss harvesting is often framed as a December task, but losses and gains occur throughout the year as markets move and equity compensation vests. Reviewing a portfolio for harvesting opportunities periodically, rather than only at year-end, may capture opportunities that a single annual review would miss.
Business owners
Pass-Through Strategies for Business Owners
Owners of S-corporations, partnerships, and LLCs taxed as pass-through entities have planning categories to consider that a W-2 employee generally does not. These are general categories worth discussing with a tax professional, not a specific strategy recommendation for any individual business.
S-corporation owners who also work in the business are required to pay themselves reasonable compensation before taking additional profit as a distribution, and what counts as reasonable depends on the role and the industry. Getting this wrong in either direction carries its own risk, from underpayment exposure to an inflated payroll tax bill.
Retirement plan options also expand for business owners. A SEP-IRA, a solo 401(k), and a defined benefit plan are all categories worth exploring, and each carries different contribution limits, administrative requirements, and suitability depending on the business's income, number of employees, and cash flow.
Entity-level tax planning, decisions made at the business level rather than on the owner's personal return, often has a longer lead time than personal tax moves and may need to happen before year-end or even before the entity's tax year begins. Because these decisions interact with payroll, retirement plan design, and the business's cash flow, they are generally best coordinated between the business owner's CPA and financial planner rather than decided in isolation. Our tax strategy work starts from that same coordination rather than any one strategy in isolation.
For owners already thinking about a future sale or leadership transition, these tax decisions may carry added weight, since entity structure and retirement plan design can affect what a sale ultimately nets. Coordinating tax strategy alongside business exit planning in advance, rather than at the point of sale, may leave more options open.
Straight answers
Questions about tax planning for high-income earners
That depends on individual circumstances: which of these strategies apply to your income sources, your marginal bracket, the timing of equity vesting or a business sale, and how the strategies interact with each other. There is no percentage or dollar figure that applies broadly, and any number offered without knowing your specific situation is worth treating with skepticism. A tax professional or financial planner who can see your full picture is best positioned to estimate what may be realistic for you.
Employers generally withhold federal tax on RSU vests, along with other supplemental wages, at a flat 22% rate for amounts up to $1 million in a calendar year, and 37% on amounts above that threshold, under IRS rules for supplemental wages. For many high-income households, that flat rate may not match the marginal rate that actually applies once the vest is added to salary and other income, which is why a gap between withholding and the eventual tax bill can appear at filing.
It depends on your individual circumstances. Deferring income may lower your taxable income in the year you earn it, but the deferred balance is typically an unsecured promise from your employer rather than a protected retirement asset, and it remains subject to the employer's creditors. Whether the trade-off makes sense depends on your expected tax bracket at distribution, your confidence in the employer's financial stability, and how concentrated your overall compensation already is in that one company.
Tax bunching, sometimes called charitable bunching, means combining several years of planned charitable giving into a single tax year so itemized deductions for that year clear the standard deduction, rather than spreading the same giving evenly across years where it may not clear that threshold at all. A donor-advised fund is a common vehicle for this, since it lets a household claim the deduction in the bunched year while the fund distributes grants to charities on a slower schedule.
Tax-loss harvesting means selling an investment at a loss to offset capital gains realized elsewhere in a portfolio, and up to $3,000 of ordinary income per year if losses exceed gains, with any excess carried forward to future years. The wash-sale rule disallows the loss if you buy the same or a substantially identical security within 30 days before or after the sale, so replacing a sold position usually means choosing something similar but not identical.
This material is for general educational purposes only and is not intended as tax, legal, or investment advice. Neither GGM Wealth Advisors nor Cambridge provides tax or legal advice. Please consult a qualified professional about your specific situation.
See how these strategies apply to your own picture
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