Year-End Tax Planning for High Earners

By the time you sit down to file in the spring, the prior year is closed and most of your options are gone. Real tax planning for high earners happens in the fourth quarter, while there is still time to act. Here is the short list worth reviewing before the calendar turns.

Fill the retirement buckets

• Max the 401(k) elective deferral, and check whether your plan allows after-tax contributions and in-plan Roth conversions — the mega backdoor Roth.
• If your income is too high for a direct Roth IRA, the backdoor Roth remains available; mind the pro-rata rule if you hold other traditional IRA balances.
• Self-employed? A solo 401(k) or cash-balance plan can shelter far more than a SEP for the right profile.
• Fund an HSA if you are eligible — it is the rare triple-tax-advantaged account.

Be deliberate about charitable giving

If you give, give efficiently. Bunching several years of gifts into one year — often through a donor-advised fund — can push you over the standard deduction in the year you contribute. Better still, donate appreciated long-term stock instead of cash: you skip the capital-gains tax and still deduct the full fair market value. Those over 70½ can give directly from an IRA through a qualified charitable distribution.

Harvest losses — carefully

Selling losing positions to offset realized gains (and up to $3,000 of ordinary income) is straightforward, but watch the wash-sale rule: buy back the same or a substantially identical security within 30 days and the loss is disallowed. Coordinate this with any large gains from equity comp or a fund exit.

Stay ahead of the penalty

High earners owe estimated taxes, and the safe harbor is stricter for you: paying in 110% of last year's tax (for higher-AGI taxpayers) generally avoids an underpayment penalty even if this year's income jumps. A big RSU vest or a Roth conversion can quietly blow through your withholding — check before year-end, not after.