Tax Strategy Consulting for High Net Worth Individuals in Austin

Tax strategy is a different job from preparing a return. The return reports a year that already closed. Strategy decides what the next three or four years look like while the numbers can still move. For an Austin household with an operating company, a concentrated stock position, rental property, and a family partnership, the work opens with a multi year projection of taxable income rather than a single April deadline. We model the current year, the two years after it, and any year holding a known event such as a business sale or a large option exercise. Once that projection exists the real questions become answerable. Should income land this year or next? Does a Roth conversion belong in a low year? Should a charitable gift be bunched? None of that can be read off a finished Form 1040 after the fact.

The building blocks are ordinary. Entity choice, the timing of recognition, where deductions land, and how retirement plans get funded. What makes tax strategy for high net worth clients in Austin its own discipline is the number of moving parts and the fact that federal law carries nearly the whole load. Texas imposes no personal income tax, so no state return pulls the plan in a second direction. An entity may still owe the Texas franchise tax, administered by the Texas Comptroller, but that is an entity level item rather than a household one. We read each income source against its own rules. Business profit flows through Form 1120-S or Form 1065. Rental activity lands on Schedule E. Portfolio income follows the rules laid out in Publication 550.

A worked example. A client expects 940,000 dollars of pass through profit this year and about 310,000 dollars next year, because a large contract ends in December. Left alone, roughly 630,000 dollars of income sits in the top band this year while next year runs well under it. We test whether a revised billing schedule can move 180,000 dollars of revenue into January under the client’s accounting method, whether a defined benefit contribution of 190,000 dollars fits the payroll base, and whether a donor advised fund gift of 120,000 dollars belongs in this year rather than spread at 40,000 dollars a year across three years. The gift alone reshapes the itemized picture on Schedule A. No single move is dramatic. Sequenced together, three ordinary moves change the federal result by a meaningful margin, where each one on its own would barely register.

The common mistake we see is treating strategy as a December errand. By December the year is mostly written. Payroll has already run and revenue has been recognized under the method that was in place all along. The retirement plan that needed a document signed by the end of the prior year does not exist and cannot be conjured. A second version of the same error is planning around one number, usually the marginal rate, while ignoring the Net Investment Income Tax on Form 8960, the alternative minimum tax on Form 6251, and the phaseouts that quietly raise the true cost of the next dollar. A plan that only reads the bracket table is not a plan.

Our work sits on top of clean books, because a projection is only as good as the ledger feeding it. We tie the tax strategy consulting engagement to bookkeeping and to the individual tax return work so the plan and the filing agree with each other. We do not promise a particular tax result, and no plan removes every audit risk. What we do is put the decisions in front of you while they are still decisions. Clients who want to walk through a multi year projection can request a consultation. The next twelve months are the part of your tax picture you can still change, and that is exactly where we start.

It changes the arithmetic more than people expect. A family earning the same income in New York or California carries a state tax layer that an Austin family simply does not. That absence removes a whole category of planning work. There is no state pass through entity election to weigh, no state residency credit to chase, no state add back rules reversing a federal deduction, and no second set of depreciation schedules to maintain. What remains is federal, and it gets the full attention. Tax strategy for high net worth clients in Austin therefore runs denser on federal timing and thinner on state gymnastics, which is a better trade than it sounds, because federal timing is where the larger dollars live anyway.

The absence is not total. Entities doing business in Texas may owe the franchise tax, sometimes called the margin tax, administered by the Texas Comptroller. It is measured on margin rather than on personal income, it carries a no tax due threshold, and many smaller entities file an informational report instead of writing a check. For a client holding a parent company, several single member LLCs, and an operating S corporation, the franchise question is structural rather than personal. It rarely drives the plan. Ignoring it produces a late report and a penalty that had nothing to do with the federal return. The federal filings run on their own track through Form 1120-S, Form 1065, and Form 1040.

Worked example. Two households each show 1,200,000 dollars of income. The Austin household pays federal tax only. A comparable household in a high tax state might hand over another 90,000 dollars to 130,000 dollars in state tax, and since 2018 most of that has been capped as an itemized deduction, so the federal offset is thin. The Austin family’s 120,000 dollars charitable gift is doing more relative work in the itemized calculation on Schedule A, because no large state tax deduction sits in front of it. Now change the plan. Convert 200,000 dollars of a traditional IRA to a Roth in a year when business profit drops to 300,000 dollars. In a high tax state that conversion carries a state cost that often kills the idea outright. In Austin the only real question is the federal bracket and whether the Publication 590-A rules are satisfied.

The common mistake is assuming that no state income tax means no state matters at all. Two traps follow from it. People who moved here mid year still owe their prior state for the months they lived there, and some states test departures hard, looking at days, homes, and where the family actually lives. Business owners assume the franchise tax cannot apply because no personal bill ever arrives. Both errors surface at filing, after the year has closed and nothing can be fixed. A related error is over reading the benefit. No state income tax lowers your total rate. It does nothing to your federal one, and the federal one is the larger number.

Because the plan is federal, we anchor it to federal source documents: the projection, the estimated payment schedule on Form 1040-ES, and the books that feed both of them. Our tax strategy consulting work runs alongside bookkeeping and the individual tax return filing so estimates track reality instead of last year’s guess. We make no promise about your final number. We do promise the federal levers get pulled while they are still reachable. For a household that just landed in Austin, the first full year here is the one most worth planning carefully.

The qualified business income deduction is one of the few federal breaks that rewards planning done in advance rather than paperwork done afterward. In broad terms it allows a deduction of up to 20 percent of qualified business income from a pass through entity, claimed on Form 8995 in simpler cases and on Form 8995-A once income clears the threshold. Above that threshold two limits start to bite. The deduction is capped by a measure tied to the W-2 wages the business paid and, in some cases, the unadjusted basis of qualified property it holds. Separately, a specified service trade or business, a category that captures most consulting, law, medicine, and financial services work, loses the deduction entirely once income runs far enough past the line.

That structure creates real levers. If the binding limit is the wage measure, the question becomes whether reasonable compensation through the S corporation should rise, since more Form W-2 wages can lift the cap even though those wages are themselves taxable. If the business is a service business sitting near the phase out, the lever is income timing rather than wages, because pulling taxable income back under the threshold restores a deduction that simply vanishes above it. If a client runs two businesses, one a service business and one not, how the entities are drawn matters more than any single election. Payroll facts drive most of the answer, so the employment tax records are part of the analysis from the start.

Worked example. A client’s non service S corporation shows 700,000 dollars of qualified business income and pays 90,000 dollars in wages, including the owner’s salary. The wage based limit runs to roughly half of W-2 wages, about 45,000 dollars, far below the 140,000 dollars that 20 percent of the income would otherwise suggest. Raising owner compensation to 260,000 dollars lifts that cap to roughly 130,000 dollars. The extra 170,000 dollars of salary carries employment tax, mostly the Medicare portion at that level, costing something near 5,000 dollars. The deduction recovered is worth several times that at a high federal rate. Run identical numbers for a service business and the answer flips completely, because no amount of wages rescues a deduction that has already phased out.

The common mistake is treating the deduction as automatic, something the software discovers in April. By April the wages are paid, the entity is what it is, and the income has been recognized. A second mistake is the mirror image: owners who cut salary to almost nothing to save employment tax and then find the wage limit has cost them more deduction than they saved, on top of the reasonable compensation exposure a token salary creates. Sound tax strategy for high net worth clients in Austin sets the salary once, early, with both effects sitting on the same page rather than in two separate conversations months apart.

None of this works without a clean wage and profit record, which is why our tax strategy consulting engagement sits on top of bookkeeping rather than beside it, and why the modeled result has to agree with the individual tax return filed at year end. We do not promise that any deduction survives review, and no return is beyond an audit. What we do is set the facts early enough that the deduction has a fair chance of standing. Decide the salary in March, not in December, and the rest of the year gets easier to plan around.

These two look like generosity and saving. Inside a plan they are timing tools. The standard deduction is high enough that a household giving 40,000 dollars a year often gets no federal benefit from the giving at all, because 40,000 dollars of gifts plus capped state and local taxes never clears the standard amount. Bunching fixes that. Push three years of giving into one year, itemize on Schedule A that year, then take the standard deduction in the other two. A donor advised fund lets the deduction land now while the money flows out to charities over time. Giving appreciated stock rather than cash does two jobs at once. The deduction is generally fair market value, and the built in gain never gets reported on Schedule D. Percentage of AGI limits apply and vary by gift type and by recipient, which is why the mix has to be modeled rather than assumed.

Retirement funding does the same job from the income side. A solo 401(k), a SEP, or a defined benefit plan can move a large slice of current income out of the top bracket, and the plan rules in Publication 560 set both the ceilings and the deadlines. For an owner in their fifties with steady profit, a defined benefit plan absorbs far more than a 401(k) alone ever could. Pointed the other direction, a Roth conversion under the Publication 590-A rules deliberately pulls income forward into a low year to buy a lower rate later. In Texas, where no state tax rides along for the trip, a conversion in a trough year costs less than the same move made in a high tax state.

Worked example. A family gives 45,000 dollars a year and pays 10,000 dollars of deductible taxes. Each year the itemized total lands near 55,000 dollars, barely above the standard deduction, so the true federal benefit of that giving is small. Bunch three years into one and fund a donor advised fund with 135,000 dollars of appreciated stock carrying a 35,000 dollars basis. The itemized total in the bunch year jumps to roughly 145,000 dollars, the two off years take the standard deduction, and the 100,000 dollars of unrealized gain never reaches Form 8949 at all. Layer a 150,000 dollars defined benefit contribution into the same year and the bunch year absorbs the income the plan was trying to move. Two tools placed in one year do considerably more than either does alone.

The common mistake is writing the check from a brokerage account after selling the stock. Sell first and the gain is yours, reported on Schedule D and possibly reached by the Net Investment Income Tax on Form 8960, while the charity receives exactly the same money either way. Transfer the shares instead and the gain disappears from the return entirely. A second mistake is missing plan deadlines. Some plans must exist before year end, and a plan you decide to adopt in March cannot always reach backward to help the year you actually wanted it for.

Both moves need a projection behind them to be worth anything. We coordinate with the client’s own investment advisors rather than managing money ourselves, and we tie the modeling to bookkeeping and to the individual tax return work so the deduction that was modeled is the deduction that gets filed. Where the giving plan reshapes the projection, it feeds back into tax strategy consulting. No promise is made about a final tax figure. Pick the bunch year now, and the next three years of giving get simpler to execute.

Start before you move, not after. The move year is a split year. You will generally file a part year return with the state you left covering the income earned while you lived there, plus a federal Form 1040 for the whole year. What matters is the date the move actually happened and whether you can prove it. High tax states test departures on facts rather than intent, looking at where the family sleeps, where the children attend school, where the vehicles are registered, and where the doctors sit. The federal return cares about none of this. The prior state cares a great deal, and the burden of showing you left usually rests with you. Gather that evidence as it happens rather than rebuilding it two years later under a notice.

Then look at what can wait. A capital gain recognized after the move is generally a Texas gain, meaning no state layer at all, and it shows up only on Form 8949 and Schedule D federally. That argues for pushing a discretionary sale past the move date. Not everything travels, though. Compensation for work performed in the old state, including some option and deferred compensation, is often sourced back to where the work was done no matter where you live when it pays out. Rental property left behind stays taxable where it sits and keeps reporting on Schedule E. So the plan sorts income into what the move changes and what it does not, and only the first group gets timed around the moving truck.

Worked example. A client moves in June holding 3,000,000 dollars of employer stock with a 400,000 dollars basis, plus 600,000 dollars of restricted stock vesting in September that was earned across three prior years of work in the old state. Selling 2,600,000 dollars of the long held position after the June move keeps the 2,200,000 dollars gain outside the old state’s reach, reported federally on Form 8949 and Schedule D. The September vesting behaves differently. Because the service period was worked in the old state, much of that 600,000 dollars is likely sourced there even though the client now lives in Austin. Treating both events alike is where people lose money, often around 100,000 dollars of it on the vesting piece alone.

The common mistake is closing on the Austin house and assuming the tax move happened that same day. It did not. People keep the old driver’s license, keep voting there, keep an apartment for a teenager finishing school, and then spend 140 days back in the old state on business. Any one of those is survivable. Stacked together they invite a residency audit that arrives two years later. The second mistake is selling the company just before the move, believing Texas will shelter a gain that was already recognized. The recognition date governs, and it does not move because you did.

The upside is real once the year turns. From the first full calendar year here the plan runs purely federal, which is why tax strategy for high net worth clients in Austin gets simpler and stronger at the same time. Entities may still owe the Texas franchise tax through the Texas Comptroller, so the structure gets a look too. We line up tax strategy consulting with bookkeeping and the individual tax return filing so the move year and the first clean year both get handled properly. We make no guarantee about how a prior state will read your facts. Plan the move date the way you would plan a closing date, and your first Texas year starts on solid ground.