Retirement Accounts Beyond the Basics

If you’re only contributing to a 401(k), you’re leaving money on the table. The 2025 employee deferral limit is $23,500 ($31,000 if you’re 50 or older), and that alone won’t move the needle much at high income levels. Here’s where it gets interesting:

• Backdoor Roth IRA — you can’t contribute directly to a Roth above the income limit, but you can contribute to a traditional IRA (non-deductible) and convert it immediately. No income cap on conversions. Make sure you don’t have existing traditional IRA balances or you’ll trigger the pro-rata rule.
• SEP-IRA — if you have self-employment income, you can defer up to 25% of net earnings, maxing at $70,000 for 2025
• Defined benefit plan — this is the heavy hitter. A cash balance pension plan lets certain self-employed professionals defer $200,000+ per year, depending on age. An orthodontist or law firm partner in their 50s earning $600K can shelter a huge chunk. It requires an actuary and has ongoing costs, but the tax savings dwarf the fees.

Charitable Giving That Actually Saves Taxes

Writing a $5,000 check to your alma mater is a fine thing to do. It’s not tax planning. Real charitable tax planning for high earners looks different.

Donor-advised funds (DAFs) let you front-load several years of giving into one tax year. You get the full deduction in the year of contribution, but you distribute the money to charities over time. If you’re in a high-income year — a big bonus, a business sale, a one-time windfall — a DAF lets you bunch that deduction when it’s worth the most.

Donating appreciated stock instead of cash eliminates the capital gains tax you’d owe on the sale and still gives you the full fair market value deduction. If you’re sitting on shares with a low basis, this is almost always better than selling and writing a check.

For those over 70½, qualified charitable distributions (QCDs) from your IRA directly to a charity satisfy your required minimum distribution without adding to your taxable income. Up to $105,000 per year in 2025.

Entity Structuring and the SALT Cap

The SALT deduction cap is no longer the $10,000 ceiling that hammered NYC residents from 2018 through 2024. OBBBA §70410 raised the cap to $40,000 for 2025 through 2029, with a phase-down for taxpayers whose modified AGI exceeds $500,000 down to a $10,000 floor. For a married couple in Manhattan paying $35,000 in combined state, city, and property taxes, that change alone can be worth thousands at the federal level.

Even with the higher cap, the New York pass-through entity tax (PTET) is still useful for business owners whose state and local taxes blow past $40,000. The entity pays state tax at the entity level (not subject to the SALT cap at all) and you take a credit on your personal return. New York explicitly created the PTET for this purpose, and the math still favors it for most owners above the SALT phase-down threshold.

Entity choice matters in other ways too. Whether you’re operating as a sole proprietor, single-member LLC, S-corp, or C-corp affects your self-employment tax, your ability to split income, and your access to the qualified business income deduction under Section 199A — which OBBBA §70401 made permanent. The right structure depends on your specific numbers, not a rule of thumb you read online.

Deferral and Timing Strategies

If you control the timing of your income — a business owner choosing when to take distributions, a consultant deciding when to invoice — shifting income between tax years can make a real difference. Move income into a year with lower rates or higher deductions. Accelerate deductions into a year when your marginal rate peaks.

The counterintuitive part: sometimes it makes sense to accelerate income and pay more tax now. If you expect rates to go up (and they’ve been at historic lows), locking in today’s rates by converting traditional IRA balances to Roth — even though it’s painful in the current year — saves you over a lifetime. Managing your quarterly estimated payments is key when shifting income between years.

Sources & References

• IRS Publication 17 — Your Federal Income Tax
• IRS Tax Topic 409 — Capital Gains and Losses
• IRS — Net Investment Income Tax (NIIT) Overview
• 26 U.S.C. Section 199A — Qualified Business Income Deduction (Cornell Law)
• 26 U.S.C. Section 164 — Deduction for State and Local Taxes (as amended by OBBBA §70410)
• New York State — Pass-Through Entity Tax (PTET)