Taxes are a necessary part of life, but in the words of Judge Learned Hand, "there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible." Reaching the upper rungs of the income ladder (the top 10% of taxpayers, about $250,000 annually) typically means a more complicated and elaborate financial picture. Employing a professional tax advisor is no longer a luxury; it becomes a necessity. Do-it-yourself tax planning at higher income levels risks suboptimal outcomes.
Hence, what follows is not a list of suggestions, but an outline of ideas and considerations that may arise when conferring with your tax advisor, and are intended to help with meeting preparation.
Basic considerations
- Maximize retirement account contributions: Such contributions may reduce taxable income, and taxes are deferred on investment earnings.
- Maximize itemized deductions: Review your current levels of state and local taxes, mortgage interest and charitable donations deductions to determine if the total itemized deductions exceed the standard deduction. If not, consider ways to pull future deductions to the present, such as bundling next year's charitable donations to a donor advised fund. This will allow you to optimize the tax benefits of your itemized deductions.
- Tax-efficient portfolio management: Index funds and ETFs have low turnover rates, so they generate fewer taxable events. The capital gains tax rate applies to qualified stock dividends. Pay close attention to tax basis and holding periods when buying or selling stocks.
- Loss harvesting to offset realized capital gains: Tax consequences should not drive buy-sell decisions in portfolio management, but they should be taken into account. Taxes on gains may be reduced by selling some losers.
- Qualified charitable distributions from IRAs: Taxpayers who are 70 ½ and older may arrange for the direct distribution from an IRA to a qualified charity, and up to $111,000 may be distributed in 2026. The qualified charitable distribution will not be included in adjusted gross income. For taxpayers who are 73 and older, the charitable distribution will count towards the annual Required Minimum Distribution from the IRA.
- Tax-free municipal bonds: Taxpayers in the top tax brackets may find that the freedom from federal taxation (and, in some cases, state and local taxes) on bond interest payments more than offsets the lower interest rates associated with municipal bonds when compared with corporate bonds. Note that, for retirees, income from tax-free municipal bonds may affect taxation of Social Security benefits and Medicare premiums.
- Save for college: There are no income limits on who may contribute to a 529 college savings plan. There are no taxes on earnings, and distributions are potentially tax free.
Advanced strategies
- Roth IRAs for family members: If a family-owned business employs the spouse or children of the owner, providing them with earned income, they will be eligible to fund Roth IRAs.
- Mega backdoor Roth IRA: If an employer’s 401(k) allows after-tax employee contributions beyond the annual limit on pre-tax deferrals, and if the plan allows for in-service Roth conversions, it may be possible to fund a Roth IRA at higher than ordinary levels.
- RSUs and ISOs: If you have been granted Restricted Stock Units (RSUs) or Incentive Stock Options (ISOs), you’ll need to do some multi-year tax planning that takes into account your vesting and exercise schedule, estimated taxable income, tax withholdings, your available cash for extra tax payments, and your tolerance for the risks of a concentrated portfolio.
- For business owners: Maximize the 20% Qualified Business Income Deduction. Take advantage of 100% bonus depreciation for the acquisition of qualifying assets placed in service. Establish or contribute to a qualified retirement plan, such as a Solo 401(k) plan, a 401(k) plan, or SEP-IRA.
- Charitable trusts: A Charitable Remainder Trust can provide income for yourself or a family member, at death the remainder to a designated charity, and valuable income and estate tax reductions. A Charitable Lead Trust is the reverse, income to charity for a term of years, followed by the return of the trust assets to the family. For both a Charitable Remainder Trust and a Charitable Lead Trust, the income interest must be a fixed dollar amount (annuity trust) or a fixed percentage of the trust assets, determined annually (unitrust).
- Private foundations: To establish a permanent legacy that perpetuates family philanthropic values, a private foundation may be established. Family members may serve on the governing board, or as staff, and be engaged in the charitable mission of the foundation. Compensation is permitted. An income tax deduction is allowed, capital gains taxes on appreciated property donated to the foundation may be avoided, and estate taxes on the donated property will be eliminated.
- Buy, borrow, die: When an appreciated asset is sold, the proceeds are subject to tax on the capital gain. Alternatively, the asset may be used as collateral for a loan, and the loan proceeds are not taxable at all, unless the loan is forgiven. The loan may provide liquidity for meeting the daily living expenses. If the asset is held until the death of the owner, its tax basis is stepped up to fair market value, so the growth in asset value avoids taxes entirely. The heirs may then sell the asset at no tax cost and use the proceeds to pay off the loan.
Creating your wealth management team
Aside from a tax advisor, it can be helpful to consult with an Arvest Client Advisor or Trust Officer on a financial plan that addresses risk, taxes and wealth transfer. They can offer tax-efficient strategies to help accomplish your investment and philanthropic goals. Although many of the basic ideas suggested above can apply to people at any income level, they are most valuable for those in higher tax brackets. The more advanced strategies can be particularly helpful when started early and implemented over the course of a lifetime. Additionally, our advisors and officers can provide access to the Arvest Wealth Management Advanced Planning Team, which is composed of professionals with advanced expertise in this area of financial planning. If any of these ideas have piqued your interest, let us know.
This content has been prepared by The Merrill Anderson Company and is intended as a general guideline.
© 2026 M.A. Co. All rights reserved.
Arvest and its associates do not provide tax or legal advice. The information presented here is not intended as, and should not be considered, tax or legal advice. Consult your tax and legal advisors accordingly.
