Let’s face it: if you earn a high income, the tax code was not built to make things easy. Besides facing high marginal tax rates, most deductions and credits start to disappear as income rises, creating a complicated web of potential opportunities to plan ahead and minimize taxes during a high-income year. Often this requires coordinating several competing strategies at once, and revisiting the plan every year as rules shift, as they recently did heading into 2026.

This guide is for executives, business owners, physicians, attorneys, and high-income households earning above $200,000, common among our clients in the DC metro area. We’ll walk through the 2026 tax landscape first, then dive into a few specific moves for retirement accounts, charitable giving, investment strategy, business structure, and estate planning.

At a Glance

• The top tax rate of 37% applies to taxable income above $640,600 (single) or $768,700 (married filing jointly) in 2026.
• Maxing out your 401(k), HSA, and IRA contributions can reduce adjusted gross income by more than $30,000 per year.
• A new 0.5% of AGI floor now applies to itemized charitable deductions, and a separate rule caps the benefit of itemized deductions at 35% for those in the 37% tax bracket. Both rules change the math on charitable giving in 2026.
• Charitable strategies such as donor-advised funds and donating appreciated stock may produce an immediate deduction while avoiding capital gains tax.
• Coordinated planning across these opportunities can beat any one tactic used in isolation.

Jump to a section:

• How the 2026 Tax Landscape Affects High Earners
• 10 Ways to Lower Your 2026 Tax Bill
• Why This Only Works as a Coordinated Plan
• FAQ

How the 2026 Tax Landscape Affects High Earners

Three things changed at once for 2026, and together they matter more than any single year’s inflation adjustment usually does.

Rates and brackets. The seven federal rates (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent, thanks to the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025. The 37% top rate applies above $640,600 in taxable income for single filers and $768,700 for married couples filing jointly. The standard deduction is $16,100 (single), $32,200 (married filing jointly), and $24,150 (head of household). The AMT exemption is $90,100 (single) and $140,200 (married filing jointly).

A much larger SALT deduction, with a catch. The potential state and local tax deduction jumped from $10,000 to $40,400 for 2026. For a lot of our clients in Maryland, Virginia, and DC, that’s the first time since 2018 that state income and property taxes have actually mattered on a federal return. The catch: the cap starts phasing down to the original $10,000 limit once your modified adjusted gross income crosses $505,000, shrinking by 30 cents for every dollar above that line until it bottoms out at $10,000 around $606,000 of MAGI. In short, the SALT deduction shrinks at higher incomes, and if your income sits in the $505,000-606,000 range, you could face even higher marginal tax rates as a result of the SALT deduction phaseout.

New limits on itemized deductions, including charity. Two major changes took effect for 2026 that should change the common thinking on charitable deductions:

• A 0.5% of AGI floor now applies to itemized charitable deductions. Only the amount you give above 0.5% of your AGI counts. If your AGI is $800,000, the first $4,000 of giving in a year produces no deduction at all.
• Itemized deductions for anyone in the 37% bracket are now reduced. The math gets complicated, but here’s the practical effect: the tax benefit of every itemized deduction, not just charitable gifts, is capped at 35 cents on the dollar instead of 37.

Neither change eliminates the benefit of giving or itemizing, but both offer opportunities for bunching, timing, and using appreciated assets instead of cash.

One more 2026 change worth noting if you’re over 50: catch-up contributions to 401(k), 403(b), and 457 accounts for anyone whose prior-year wages exceeded $150,000 now have to go in as Roth, not pretax, eliminating one way to shelter that income.

10 Ways to Lower Your 2026 Tax Bill

1. Max out your 401(k), 403(b), or 457

The 2026 employee deferral limit is $24,500, with an $8,000 catch-up at 50+, or $11,250 if you’re 60 to 63. If you earned over $150,000 in wages last year, remember the catch-up piece has to be Roth.

Say you’re in the 37% bracket and defer the full $24,500. That’s an estimated $9,065 off this year’s federal tax bill, plus whatever your employer match adds on top, tax-deferred.

2. Use a SEP-IRA, solo 401(k), or defined benefit plan if you’re self-employed

Business owners have more planning opportunities here. A SEP-IRA or solo 401(k) allows contributions up to 25% of compensation, capped at $72,000 for 2026.

If you’re over 50 with consistent profit, a defined benefit plan can go well past that, sometimes north of $100,000 a year, because the contribution is actuarially set against a target retirement benefit. These plans need an actuary, annual funding commitments, and administrative upkeep, so they often make the most sense for stable, high-margin businesses rather than those with uneven cash flow. Loop in your CPA and an actuary before setting one up.

3. Consider a backdoor Roth IRA

Direct Roth IRA contributions phase out between $153,000 to $168,000 of income for single filers and $242,000 to $252,000 for married couples in 2026. Conversions have no income limit, which is where the backdoor Roth IRA strategy comes in. This two-step process works by contributing first to a traditional IRA, then converting it.

This strategy can be a trap. If you hold pretax money in any traditional, rollover, SEP, or SIMPLE IRA, the pro-rata rule can make part of your conversion taxable, and it requires reporting the contribution and conversion correctly on your tax return. If recorded wrong, you could pay tax twice. Talk to your CPA before doing this if you have other IRA balances.

While a backdoor Roth IRA doesn’t lower this year’s taxable income, it offers the chance at tax-free growth and tax-free withdrawals later.

4. Max out your HSA

An HSA is the only account in the tax code that gives you a deduction going in, tax-free growth, and tax-free withdrawals coming out, as long as the money goes toward qualified medical expenses. The 2026 limits are $4,400 for self-only coverage and $8,750 for family coverage, plus a $1,000 catch-up at age 55+.

If you can afford to pay current medical bills without tapping the HSA, consider leaving it invested for the long term rather than spending from the account. This effectively turns the HSA into another source of retirement funds with great tax benefits.

5. Bunch charitable gifts into a donor-advised fund

Think of a donor-advised fund (DAF) as your own charitable savings account. A DAF takes a lump-sum contribution, gives you an upfront tax deduction in the year you fund it, and lets you grant it out to charities over time, even in future years. That flexibility is what makes bunching, combining several years of planned giving into one high-income year, work.

The new 0.5% AGI floor makes bunching even more valuable. Say your AGI is $800,000 and you’d normally give $20,000 a year. Under the new floor, $4,000 of that gift produces no deduction, every single year. Fund $80,000 into a DAF once instead, and the floor only costs you once: a $76,000 deduction in the year you fund it, versus $64,000 in aggregate if you’d given the same total across four separate years. You can still grant the money out to charities on whatever timeline you originally planned.

Cash gifts to public charities are deductible up to 60% of AGI, and gifts of appreciated long-term assets up to 30% of AGI. Both limits apply on top of the new 0.5% floor and the 35% cap on itemized deduction value described above.

6. Donate appreciated securities instead of cash

If you’re sitting on stock that’s gained value, especially concentrated stock positions or long-held index funds, donating the shares directly instead of selling and giving cash can allow you to deduct the fair market value while skipping the capital gains tax.

If you’re 70½ or older, a qualified charitable distribution (QCD) is another opportunity. You can send up to $111,000 in 2026 directly from your IRA to qualifying charities. It counts toward your RMD, it’s excluded from taxable income rather than run through the itemized deduction rules, and it completely bypasses both the 0.5% floor and the 35% cap. For clients already taking RMDs who give to charity anyway, this is usually the most efficient dollar-for-dollar move available to them.

7. Harvest tax losses

Selling investments at a loss to offset realized gains is still one of the most underused tools available, especially for anyone carrying concentrated stock. Up to $3,000 of net losses can offset ordinary income each year, and anything beyond that carries forward indefinitely.

Watch the wash sale rule: the loss is disallowed if you buy the same or a substantially identical security within 30 days before or after the sale. Done well, you replace the position with something similar, not identical, so your market exposure doesn’t change while you take the loss.

8. Hold municipal bonds for tax-exempt income

Municipal bond interest is generally exempt from federal tax, and often state tax too if you buy bonds from your own state. The math gets more favorable the higher your tax bracket.

9. Optimize your business and real estate structure

If you own a pass-through business, an S corp, a partnership, or a sole proprietorship, the qualified business income (QBI) deduction can allow you to deduct up to 20% of qualified business income, and OBBBA made it permanent. Different rules apply to specified service businesses (health, law, accounting, consulting, financial services, athletics), and phase-in ranges apply, so it’s worth coordinating with an accountant.

Owners of rental real estate have even more opportunities available, including depreciation, cost segregation, real estate professional status, and the short-term rental exception. Again, careful coordination with a CPA is crucial here.

If you’re realizing a large capital gain, from a business sale or otherwise, a Qualified Opportunity Zone (QOZ) investment can defer tax on that gain, and appreciation on the QOZ investment itself is excluded from tax after a ten-year hold. These carry real illiquidity and concentration risk, so it’s necessary to evaluate the investment implications alongside the tax planning.

10. Use annual gifting, trusts, and 529 plans to move wealth efficiently

For 2026, individuals can gift $19,000 per recipient ($38,000 per married couple) with no gift tax return required and no dent in your lifetime exemption. That lifetime federal estate and gift exemption is $15 million per person, or $30 million per married couple, and OBBBA made it permanent rather than letting it revert to roughly half that amount as previously scheduled.

Irrevocable trusts allow even more room for shifting assets in a tax-efficient way. A grantor retained annuity trust (GRAT) can move future appreciation out of your taxable estate, and an irrevocable life insurance trust (ILIT) can hold a policy so the death benefit sits outside your estate entirely. Both take careful drafting from an estate attorney working alongside your advisor.

529 college plans remain one of the more flexible tools available. Contributions grow tax-free, qualified withdrawals are tax-free federally, and Maryland, DC, and Virginia both offer a state income tax benefit for resident contributions. A powerful estate planning strategy is to front-load five years of annual exclusion gifts into a 529 at once: $95,000 per beneficiary from an individual, or $190,000 from a married couple, moving a large sum out of your estate while it grows tax-free inside the account. An informational gift tax filing is required when frontloading. And if a beneficiary doesn’t use all the funds, SECURE 2.0 now allows a limited rollover into their own Roth IRA, offering the chance at even more tax-free growth.

Why This Only Works as a Coordinated Plan

Each of these strategies stands on its own. But used without careful coordination, they can work against you. A large pretax 401(k) deferral can help a business owner stay under a QBI threshold, but a Roth conversion mistake in the same year can push MAGI past $505,000 and wipe out most of the SALT deduction.

Timing is key, and projecting across years often paints a clearer picture of the possibilities. None of that is visible if you’re optimizing one line item at a time.

It also compounds forward. What you do in a peak-earning year shapes the required minimum distributions you’ll face decades later, how much of your portfolio sits in taxable versus tax-free accounts, and what your heirs ultimately inherit.

Schedule a Tax Planning Consultation with Glassman Wealth

We coordinate all five of these areas, retirement, investment, charitable, business, and estate planning, into one plan built around your specific situation. As a fee-only fiduciary firm, we’re compensated only by our clients, and we work alongside your CPA and estate attorney. If you’re trying to figure out which of these strategies actually apply to you in 2026, it may be worth a conversation.

Frequently Asked Questions

How can high-income earners reduce their taxable income legally? By combining pretax retirement contributions, HSA funding, strategic charitable giving through a DAF or appreciated securities, and tax loss harvesting, then coordinating all of it with a CPA and a fiduciary advisor rather than running each tactic in isolation. Since 2026, that coordination also has to account for the new 0.5% AGI floor and 35% cap on itemized deductions.

What is the new 0.5% AGI floor on charitable deductions? Starting in 2026, only the portion of your itemized charitable giving above 0.5% of your AGI is deductible. If your AGI is $500,000 and you give $10,000, the first $2,500 produces no deduction. It applies to itemizers only, not to the new above-the-line deduction for non-itemizers or to qualified charitable distributions (QCDs).

What’s the best retirement account for reducing taxes if you earn over $200K? It depends on how you’re employed. Most W-2 employees are capped at the $24,500 401(k) deferral for 2026. Self-employed earners may be able to go up to $72,000 through a SEP-IRA or solo 401(k), and a defined benefit plan could offer even higher savings levels for certain business owners.

Does a backdoor Roth IRA reduce taxable income? No. Its value is tax-free growth and the potential for tax-free withdrawals in retirement, not a current-year deduction.

What is tax loss harvesting, and how does it help high earners? Selling investments at a loss to offset capital gains elsewhere in your portfolio. Net losses beyond your gains can offset up to $3,000 of ordinary income per year, with the rest carried forward. The wash sale rule disallows the loss if you buy a substantially identical security within 30 days.

How does the SALT deduction change affect high earners in 2026? The cap rose from $10,000 to $40,400, which helps significantly in high-tax states like Maryland, Virginia, and DC. It phases down once your MAGI passes $505,000, shrinking by 30 cents per dollar above that line until it hits the $10,000 floor around $606,000 of MAGI.

Should high earners work with a financial advisor for tax planning? Generally, yes. A fiduciary advisor with a focus on financial planning can coordinate retirement, investment, charitable, business, and estate strategies across multiple tax years. CPAs alone, or DIY planning, can miss opportunities.

Sources

All figures verified against primary or near-primary sources on August 14, 2026.

Figure or claim	Source
Top 1% AGI threshold of $675,602 and 26.3% average income tax rate (tax year 2023 data)	Tax Foundation, “Who Pays Federal Income Taxes?”
Seven 2026 tax rates; 37% thresholds of $640,600 (single) and $768,700 (MFJ); OBBBA rate permanence	IRS, “Tax inflation adjustments for tax year 2026” and Tax Foundation, “2026 Tax Brackets”
2026 standard deduction of $16,100, $32,200, and $24,150	IRS, “Tax inflation adjustments for tax year 2026”
SALT cap of $40,400, phase-out above $505,000 MAGI, reversion to $10,000 in 2030	Thomson Reuters, “State and local tax (SALT) deduction”
SECURE 2.0 mandatory Roth catch-up for prior-year FICA wages above $150,000	IRS, “Retirement topics: Catch-up contributions”
2026 AMT exemption of $90,100 (single) and $140,200 (MFJ)	IRS, “Tax inflation adjustments for tax year 2026”
2026 employee deferral of $24,500; catch-ups of $8,000 and $11,250	IRS, “401(k) limit increases to $24,500 for 2026”
SEP-IRA and solo 401(k) ceiling of $72,000 for 2026	Fidelity, “401(k) contribution limits”
Roth IRA phase-outs of $153,000 to $168,000 (single) and $242,000 to $252,000 (MFJ)	IRS, “401(k) limit increases to $24,500 for 2026”
2026 HSA limits of $4,400 self-only and $8,750 family; the $1,000 catch-up at 55+ is set by statute under section 223(b)(3)	IRS Rev. Proc. 2025-19
Charitable AGI limits of 60% for cash and 30% for appreciated property	IRS Publication 526, “Charitable Contributions”
Wash sale rule and the 30 day window	IRS Publication 550, “Investment Income and Expenses”
3.8% net investment income tax and its application to bond interest	IRS, “Net Investment Income Tax”
Qualified Opportunity Zone deferral and 10 year exclusion	IRS, “Opportunity zones”
OBBBA made the 20% QBI deduction permanent; SSTB phase-out and widened range	Thomson Reuters, “Qualified business income deduction”
2026 annual gift exclusion of $19,000 and estate and lifetime gift exemption of $15 million	IRS, “Tax inflation adjustments for tax year 2026”

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