Build it
High W-2 income, and almost nothing left to deduct
Most tax advice assumes you own a business. When your income is a paycheck, the levers are fewer, and using them depends entirely on timing.
In one paragraph
Tax strategy for high-income W-2 professionals focuses on the decisions still available when deductions are limited: how much income to defer and when, where to hold which assets, how to time charitable giving and equity sales, and how to fund retirement accounts in the right order. Most of it must happen before December 31.
What we actually do
The work, item by item
- 01
Look at this year and next year together
Bracket planning across two years beats optimizing one. A bonus, a vest, or a sabbatical can make one year the obvious place to accelerate income and the other the place to defer it.
- 02
Use deferred compensation deliberately
If your employer offers a non-qualified deferred comp plan, the election deadline usually falls well before the money is earned, and the decision carries real trade-offs including employer credit risk. It deserves a yearly conversation, not an autopilot setting.
- 03
Get asset location right
Which investments sit in taxable accounts and which sit in tax-deferred ones affects your after-tax return without changing your allocation at all. It is one of the few free improvements available.
- 04
Fund accounts in a sensible order
Employer match, HSA where available, backdoor and mega-backdoor Roth contributions where the plan allows, then taxable. The order matters, and several of these have rules that are easy to trip.
- 05
Time charitable giving into the right year
Concentrating several years of giving into one high-income year, often through a donor-advised fund, and giving appreciated shares rather than cash, changes the arithmetic for people who were already going to give.
- 06
Work directly with your CPA
We do not prepare returns and we do not give tax advice. We bring your accountant the projections and the questions in the fall, while there is still time to act on the answers.
The problem
Your CPA files the return. The planning happens earlier.
A good accountant reports last year accurately. That work happens after every decision that mattered has already been made. By March, the year is closed.
Meanwhile the strategies you read about assume a business owner: entity structures, expensing, retirement plans you control. As a W-2 earner with a large bonus and equity, your standard deduction is probably the only one you take, and your marginal rate is high enough that timing swings real money.
What remains is a smaller set of levers that only work in advance. Deferral elections often close months before the compensation is earned. Charitable timing has to happen in the year you want the deduction. Equity sales have to be planned around the rest of your income, not after it.
An example
The year that was already over
A radiologist and her husband, combined income in the high six figures, sit down with their accountant in March. The return is accurate and the number is large. Nothing said in that meeting can change it, because every decision that would have moved it closed on December 31.
Run the same year differently and the conversation happens in October. The deferral election is still open. A charitable gift can still be made with appreciated stock instead of cash. A Roth conversion can still be sized against the bracket she is actually in rather than the one she assumes. The November vest can still be planned around.
Same household, same income, same accountant. The difference is holding the conversation while the year is still in play.
A composite illustration, not a specific client. Your situation and results will differ.
Free tool
Vesting this year? Find the tax bill nobody warned you about.
Employers commonly withhold federal tax on vesting RSUs at 22%. Plenty of the people we work with sit in the 32% or 37% bracket, and that difference shows up as a bill at filing. Five inputs and about twenty seconds gives you the number.
- Shares vesting
- 1,200
- Value at vest
- $180,000
- Withheld at 22%
- $39,600
- Owed at 35%
- $63,000
- Gap to cover
- $23,400
Straight answers
Tax strategy: common questions
More than most people use, and fewer than a business owner has. The practical list includes deferred compensation elections, retirement account sequencing including backdoor and mega-backdoor Roth contributions where your plan allows, HSA funding, asset location across account types, charitable bunching through a donor-advised fund, gifting appreciated stock instead of cash, and timing equity sales around your other income. Almost all of them require action before year end.
No. Neither GGM Wealth Advisors nor Cambridge provides tax or legal advice, and we do not file returns. Our role is to bring planning questions to your CPA early enough that the answers can still change the outcome, and to make sure the investment and insurance decisions on our side line up with what your accountant is doing on theirs.
Most opportunities close on December 31, and several close much earlier. Deferred compensation elections are often locked in the prior year. Charitable gifts must be completed in the year you want the deduction. Equity sale timing depends on trading windows you may not control. The practical answer is that fall is the right time to have the conversation, not spring.
Related
These usually come up alongside it
- What this involves →
Equity compensation
Vest dates arrive whether or not anyone has thought about them. The work is deciding, ahead of time, what you sell, what you hold, and what the tax bill will be.
- What this involves →
Executive compensation
Deferral elections, bonus timing, benefit choices, severance terms. Each one is a decision, and most of them default if you leave them alone.
- What this involves →
Retirement income
It is the question most people ask late and quietly. Answering it properly takes an afternoon, and the answer changes how you feel about the next ten years.
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. Estimates are illustrative, based solely on the figures you enter and simplified assumptions. Your actual results will differ.
Let's start with a conversation
Bring whatever is on your mind: a vest date you are unsure about, an offer you are weighing, a business you might sell in three years. Nothing to prepare, no cost, and you will leave with something useful whether or not we end up working together.