Framework · Stage 1–5
High-Income W-2 Tax Stack
Every tax strategy available to a high-income W-2 employee — ordered by practical value. Work through the stack in sequence. Do not start at Rank 9 before completing Ranks 1–5.
Max Traditional 401k / 403b
Up to $8,225/yr at 35%
Limit: $23,500 employee (2025) · $31,000 if 50+
Traditional wins if marginal rate today > expected retirement rate. Always capture the full employer match first.
Applies to: Everyone with employer-sponsored plan
Max HSA (if on HDHP)
Up to $2,993/yr at 35%
Limit: $4,300 single / $8,550 family (2025)
The only account that is deductible + grows tax-free + withdraws tax-free for medical. Invest the balance. Pay expenses out of pocket and save receipts.
Applies to: Anyone on a qualifying High Deductible Health Plan
Backdoor Roth IRA
$7,000/person · tax-free growth permanently
Limit: $7,000 ($8,000 if 50+) per person
Non-deductible IRA → immediate Roth conversion. Resolve pre-tax IRA balances first to avoid the pro-rata trap. File Form 8606.
Applies to: MAGI above Roth direct limit ($150k single / $236k married)
Mega Backdoor Roth
Up to $46,500 additional Roth per year
Limit: Total 401k limit $70,000 minus employee + employer contributions
After-tax 401k contributions + in-plan Roth conversion. Requires plan to allow after-tax contributions AND in-plan conversion or in-service withdrawal. Most plans do not allow it — check your SPD.
Applies to: Plans that allow after-tax contributions with Roth conversion
Tax-Efficient Taxable Brokerage
0.3–0.7%/yr drag reduction vs high-turnover funds
Limit: No contribution limit
Broad index ETFs (VTI, VXUS) in taxable. Bonds and REITs inside 401k/IRA. Asset location is worth ~0.5–1.0%/yr after-tax return improvement.
Applies to: Everyone with a taxable brokerage account
Tax-Loss Harvesting
Variable · $3,500–$7,000+ per harvest event at 35%
Limit: No limit · $3k/yr can offset ordinary income
Sell at a loss, reinvest in similar-but-different fund. The deferred tax compounds for years. Review taxable positions at 10%+ market drawdowns.
Applies to: Anyone with unrealized losses in a taxable account
Charitable Bunching via DAF
Up to $11,100/yr at 37% on $30k bundle
Limit: Standard deduction MFJ ~$32,200 (2026) — must exceed it to benefit
Contribute 3–5 years of charitable giving in one year to a Donor-Advised Fund. Deduct the full amount now. Distribute to charities over time.
Applies to: Charitable givers whose annual gifts do not exceed the standard deduction
529 College Savings
State deduction + tax-free growth (state-dependent)
Limit: Varies by state · gift tax limit $19,000/yr (2025)
Contribution is after-tax federally; many states allow a state tax deduction. Growth and qualified education withdrawals are tax-free.
Applies to: Parents with children expected to attend college
Real Estate (if investment pencils first)
Depreciation offsets rental income · non-passive if qualified
Limit: Passive loss rules apply for W-2 earners above $150k AGI
Depreciation is real. But for most W-2 earners above $150k, losses are passive and cannot offset salary. STR material participation or REP status required to deduct losses currently.
Applies to: Investors who can qualify for STR/REP and whose deal pencils on pre-tax cash flow
Side Business / S-Corp
Business deductions + solo 401k + QBI deduction
Limit: Must have genuine self-employment income
Solo 401k, SEP IRA, home office deduction, and QBI (20% of pass-through income) are available — but only if you have a real business with Schedule C or S-Corp income.
Applies to: Those with genuine self-employment or business income
Advanced Estate Planning
Step-up in basis, estate tax mitigation
Limit: Federal exemption $15M+ per person (2026)
Step-up in basis at death eliminates embedded capital gains permanently. Irrevocable trusts, GRATs, and other structures become relevant at high net worth.
Applies to: High net worth households with estate tax exposure or large appreciated assets
The honest ceiling
A $400k household that fully executes Ranks 1–4 defers approximately $19,000–$25,000 in federal taxes annually — roughly 5–6% of gross income returned through the tax code. That is real and worth doing. It does not transform your effective tax rate. Anyone claiming otherwise is selling something.