Tax Strategies Every High-Income Earner Should Know

By Martin J. Swiecki, CFP®, CLU®

High-income earners have a lot to be thankful for, but they also have a greater responsibility to manage their wealth.

High-income earners have a lot to be thankful for, but they also have a greater responsibility to manage their wealth. More income generally means being in a higher tax bracket than most people. It takes some strategic, tax-efficient investing to be able to keep more of what you earn.

Leveraging tax-advantaged retirement accounts, selecting tax-efficient vehicles, and practicing tax-loss harvesting are three ways high-income earners can optimize their finances. Learn what these three strategies entail and how you can implement them.

Maximize Contributions to Tax-Advantaged Retirement Accounts

One of the most powerful tools high-income earners have to reduce taxes is a retirement account. Every contribution you make to your employer-sponsored 401(k) or 403(b) plan reduces your annual taxable income. It’s best to maximize your annual contributions as much as possible, especially if your company has employer matching.

In 2025, the Internal Revenue Service has set an annual limit of $23,500 for 401(k), 403(b), and governmental 457 plans. You can contribute up to $7,000 to your IRA this year, and those over 50 can contribute up to $1,000 more to catch up. There is also a new “super” catch-up contribution cap of $11,250 for individuals who are between 60 and 63 years of age.

Many high-income earners become ineligible for traditional IRAs, eliminating their ability to make pre-tax contributions. Those individuals may consider rolling their non-deductible traditional IRAs to a Roth IRA. Roth contributions are made after taxes are paid, but investment growth and withdrawals in retirement are all tax-free.

If you haven’t opened a health savings account (HSA), see if you qualify. HSAs offer deductible contributions, tax-free growth, and tax-free withdrawals for approved medical expenses.

Invest in Municipal Bonds, ETFs, and Other Tax-Efficient Vehicles

Many high-income earners focus their investment strategy on stocks and mutual funds. However, they have a few other novel options that could improve their tax standing considerably.

Municipal bonds generate interest income that is completely exempt from federal income taxes. It may even be exempt from state or local taxes. High-income earners can benefit from the yield of municipal bonds, especially those issued by the states in which they live.

Exchange-traded funds (ETFs) are similar to mutual funds but are much more tax-efficient. ETFs do not generate much in capital gains because of their in-kind redemption process. When institutional investors want to redeem their ETF shares, they get shares in the stocks or bonds that those ETFs represent instead of cash. That eliminates capital gains, making ETFs highly valuable in taxable brokerage accounts.

Other tax-efficient vehicles worth considering include Universal Life (UL) policies and qualified opportunity zone (QOZ) investments.

Offset Capital Gains With Tax-Loss Harvesting

High-income earners experience investment losses just like any stakeholder. However, they have the chance to turn those losses into opportunities through tax-loss harvesting.

In tax-loss harvesting, investors sell off shares of some commodities at a loss to counterbalance capital gains in other parts of their portfolios. When losses outpace gains, high-income earners can use up to $3,000 in losses to offset income. The remainder carries forward indefinitely.

For example, if you sell stock shares for $5,000 but also lose $5,000 on another position, your tax bill is zero. As long as you don’t buy a “substantially identical” stock in a period of 30 days before or after the sale (known as the “wash-sale” rule), you can take the deduction.

Tax-Efficient Support for High-Income Earners

The Valletta Group specializes in helping high-net-worth individuals align their portfolios to tax-efficient investment strategies. High-income earners can contact us to optimize their family’s finances through independent, customer-centric services and products.

Interested in scheduling a meeting? We invite you to call (248) 720-1780 or email mswiecki@vallettagroup.com to get in touch today!

About Martin Swiecki

Martin Swiecki is the Founder and CEO at The Valletta Group, a wealth management firm based in Northville, Michigan, with a quarter century of experience helping individuals and their families navigate life’s transitions. Working closely with business owners and entrepreneurs in the medical, legal, and automotive industries as they pursue their aspirations, Martin leads a team focused on delivering tailored capabilities and services. He loves making a difference in clients’ lives by helping them reach their goals with proper planning and providing comfort and peace that someone is looking out for them.

Since starting his career in 2003, Martin has been focused on listening to his clients, seeking to gain deep insight into who they are and aspire to be—apart from their investments. He founded The Valletta Group to pursue what he believes is “A Better Way” to serve his clients.

The name of the firm, Valletta, holds special significance. Valletta is the capital city of Malta, a small island off the coast of Sicily. When Martin envisioned creating his own firm, he struggled with finding the right name. He didn’t want to use his own name or anything generic. His mother, who moved from Malta to the U.S. in her early 20s, inspired the name. Growing up, Martin and his family would visit Malta every other summer, maintaining a close connection with their heritage. In 2019, Martin took his wife, Jessica, and their two young children, Evelyn and George, to Malta, where they stayed in Valletta. It was during this trip that his wife suggested naming the firm The Valletta Group. The name not only honors Martin’s mother’s perseverance in starting a new life in the U.S. but also serves as a meaningful family tribute and a conversation starter.

Martin holds a bachelor’s degree in engineering graphics and design from Western Michigan University. He earned his CERTIFIED FINANCIAL PLANNER®, CFP® designation in 2011 and became a Chartered Life Underwriter (CLU) in 2006. Outside of work, Martin enjoys spending time with his family, pursuing outdoor activities such as golfing, boating, and fishing. To learn more about Martin, connect with him on LinkedIn.