Tax Planning for Executives and High Earners

RSUs are taxed as ordinary income when they vest, based on the shares’ fair market value on the vest date. Employers usually withhold shares to cover tax, but the default rate (22% federal for supplemental wages under $1M) is often well below a high earner’s actual rate, leaving a balance due in April.

Once vested, the vest-date value becomes your cost basis. Any later gain or loss is a capital gain: short-term if sold within a year, long-term if held longer.

How we use it: We model projected vest income to set the right estimated payments and weigh whether holding past the one-year mark is worth the concentration risk in a single employer’s stock.

An ESPP lets you buy company stock at a discount, often up to 15%. A qualifying disposition (holding at least two years from the offering and one year from purchase) taxes most of the gain at long-term capital gains rates instead of as ordinary income.

An ESOP is a qualified retirement plan invested mainly in employer stock. Distributions are generally ordinary income, but Net Unrealized Appreciation (NUA) rules can let you pay capital gains rates on the appreciation of stock taken as a lump sum.

How we use it: Disposition timing on an ESPP can swing your bill meaningfully. We track holding periods and model qualifying vs. disqualifying outcomes before you sell.

A Roth conversion moves money from a traditional IRA or 401(k) into a Roth account. You pay ordinary income tax on the converted amount now, and future growth and qualified withdrawals come out tax-free.

It works best in lower-income years: between jobs, early retirement before Social Security and RMDs, or a year with large deductions. Conversions raise MAGI, which can affect IRMAA and ACA credits.

How we use it: We build multi-year conversion ladders that fill a target bracket without spilling into the next, weighing today’s tax cost against decades of tax-free growth and smaller future RMDs.

Adjustments reduce your adjusted gross income (AGI) whether or not you itemize. Because so many credits and phase-outs key off AGI, they are among the most valuable deductions available.

Common ones include traditional IRA and HSA contributions, half of self-employment tax, self-employed health insurance, SEP and Solo 401(k) contributions, and student loan interest. Separately, the 2025 law added temporary deductions for qualified tips and overtime (2025 to 2028); they don’t reduce AGI, but you can take them whether or not you itemize.

How we use it: Maximizing pre-tax retirement and HSA contributions can lower AGI enough to restore credits that phase out just above your income.

Short-term gains (assets held a year or less) are taxed at ordinary rates, up to 37% federally. Long-term gains are taxed at 0%, 15% or 20% depending on income. The 0% rate applies up to $49,450 of taxable income for single filers and $98,900 for married couples filing jointly (2026).

High earners may also owe the 3.8% Net Investment Income Tax once MAGI passes $200,000 (single) or $250,000 (married filing jointly).

How we use it: Holding an asset just past the one-year mark can cut the federal tax on the gain substantially, often by 40% or more for top-bracket taxpayers. We also harvest losses to offset gains and manage NIIT exposure.

A Section 1031 exchange lets you sell investment or business real estate and defer the entire capital gain by reinvesting in like-kind replacement property. The tax is deferred, not eliminated: your basis rolls into the new property.

You must identify replacement property within 45 days and close within 180 days. A qualified intermediary must hold the proceeds. Since 2018, 1031 treatment applies only to real property.

How we use it: We coordinate the intermediary and the timeline so a single missed deadline doesn’t undo the deferral.

A personal second home allows mortgage interest and property tax deductions (within the SALT cap) but no rental deductions. A pure rental allows expenses and depreciation under the passive activity rules.

Mixed use is the trap. Rent it more than 14 days and use it yourself, and expenses must be allocated under the 14-day / 10% rule. The §121 exclusion ($250k single, $500k married) generally does not apply to a second home.

How we use it: Converting a second home to a primary residence before sale, or the reverse, has major capital gains consequences. We map the use timeline before you list.

The IRS sorts income into active (wages, businesses you materially participate in), portfolio (interest, dividends, gains) and passive (rentals and businesses you don’t materially participate in).

Passive losses can generally offset only passive income, not your W-2 wages. Suspended losses carry forward. Real estate professionals and the $25,000 active rental allowance are the key exceptions.

How we use it: Grouping elections, material participation hours and real estate professional status can turn trapped passive losses into deductions against ordinary income.

US citizens and green-card holders are taxed on worldwide income. The FEIE (Form 2555) lets qualifying expats exclude a large part of foreign earned income: $130,000 for 2025 and $132,900 for 2026.

You must meet the bona fide residence test or the physical presence test (330 full days abroad in 12 months). Passive income such as dividends and capital gains is always taxable.

How we use it: Claiming the FEIE disallows the refundable portion of the Child Tax Credit and blocks IRA contributions on excluded income, so it isn’t always the right choice. We compare it with the Foreign Tax Credit every year.

The FTC (Form 1116) gives a dollar-for-dollar credit against US tax for income tax already paid to a foreign government. Unlike the FEIE, it covers both earned and passive income.

In high-tax countries such as Germany, France or the UK, the FTC often eliminates US liability while preserving credits like the Child Tax Credit. If you revoke the FEIE to use the FTC, you generally can’t elect the FEIE again for five years without IRS consent.

How we use it: Excess credits carry back one year and forward ten. We track your carryovers so credits don’t expire unused.

The FBAR (FinCEN Form 114) is required if your foreign financial accounts together exceeded $10,000 at any point in the year, even for a day. It is filed with FinCEN, not the IRS.

FATCA Form 8938 is a separate, overlapping requirement filed with your return at higher thresholds. Penalties for willful FBAR violations can reach 50% of the account balance per year.

How we use it: If you’ve missed past FBARs, the streamlined procedures can bring you into compliance with reduced or no penalties, but only if you act before the IRS contacts you.

Expats get an automatic two-month extension to June 15 to file, though tax owed is still due April 15. Planning also covers totalization agreements, treaty positions, foreign pensions and the 1% excise tax on certain outbound remittances.

Self-employment tax is “sticky”: the FEIE won’t shield it, though a totalization agreement may. State tax can follow you abroad if you keep a domicile in a state like California or New York.

How we use it: Severing state residency cleanly before a move abroad can save thousands a year. We document the break so an aggressive state can’t reassert a claim.

The Child Tax Credit is worth up to $2,200 per qualifying child under 17, with up to $1,700 refundable. Recent legislation made the $2,200 amount permanent with inflation indexing.

It phases out starting at $200,000 (single) and $400,000 (married filing jointly). Each qualifying child, and at least one parent claiming the credit, must have a work-eligible Social Security number.

How we use it: For families near the phase-out, lowering AGI through retirement and HSA contributions can preserve the full credit, which is worth far more than the contribution’s direct tax saving.

A 529 plan grows tax-free, and withdrawals are tax-free for qualified education costs: college tuition, room and board, and K-12 costs up to $20,000 a year from 2026 ($10,000 a year before that).

Contributions count as gifts, so you can front-load five years of the annual exclusion at once. Unused funds can move to another beneficiary, and a limited amount can roll into the beneficiary’s Roth IRA.

How we use it: New York allows a deduction up to $5,000 ($10,000 married). New Jersey allows up to $10,000 for households under an income cap. We coordinate which state’s plan gives the family the most.

The American Opportunity Tax Credit is worth up to $2,500 per student for the first four years of college, $1,000 of it refundable. The Lifetime Learning Credit is worth up to $2,000 per return, with no year limit.

Both phase out for higher earners; the AOTC ends at $90k single and $180k joint MAGI. You can’t claim a credit on expenses also paid with tax-free 529 money.

How we use it: We often have families pay a slice of tuition with after-tax cash specifically to claim the AOTC, rather than running every dollar through the 529.

Real planning happens before December 31, not at filing. We run a mid-year projection, then layer in moves: bunching itemized deductions, timing gains and losses, shifting income, charitable strategies and retirement contributions.

For high earners we also model AMT, NIIT, the SALT cap ($40,000 for 2025 and $40,400 for 2026 for many filers) and estimated payment safe harbors.

How we use it: A coordinated year-end review of equity pay, investments and any business income is where the largest planning opportunities usually show up.

W-2 employees cannot deduct home office expenses on their federal return. The 2017 law suspended unreimbursed employee business expenses and the 2025 law made that permanent, so an employer accountable-plan reimbursement is the workaround.

The home office deduction is available to the self-employed who use a space regularly and exclusively for business, using either $5 per square foot (up to 300) or actual expenses.

How we use it: Remote work also creates state tax complexity. Where you sit while you work can change which state taxes your wages.

If you work for a New York employer but work remotely from another state for your own convenience, New York still taxes those days as New York income.

This catches New Jersey and Connecticut residents working from home for a Manhattan employer. They rely on a resident credit at home to avoid full double taxation, and it doesn’t always fully offset.

How we use it: Establishing a genuine employer necessity for out-of-state work, such as a real branch office or a business requirement, can move days out of New York’s reach. Documentation is everything.

You take the larger of the standard deduction or your itemized total. For 2026 the standard deduction is $16,100 (single) and $32,200 (married filing jointly), with more for those 65 and over.

Itemizing pays when mortgage interest, gifts and state and local taxes exceed that. The SALT cap rose to $40,000 for 2025 and $40,400 for 2026 (reduced, to no less than $10,000, above $500,000 to $505,000 of income), reopening itemizing for high-property-tax households in New York and New Jersey.

How we use it: Bunching two years of charitable gifts into one, often through a donor-advised fund, can push you over the threshold every other year.

Income without withholding, such as RSU vesting, gains, self-employment or K-1 income, usually means quarterly estimated payments. Miss them and the IRS charges a penalty even if you pay in full by April.

You are protected if you pay the lesser of 90% of this year’s tax or 110% of last year’s (for higher earners). Paying to the safe harbor lets you defer the rest until filing.

How we use it: Raising W-2 withholding late in the year is treated as paid evenly across all quarters, which fixes an estimated-payment shortfall without penalty.

An LLC separates your personal assets from business liabilities. For tax, a single-member LLC is by default a disregarded entity (Schedule C) and a multi-member LLC is a partnership.

An LLC can also elect S-Corporation taxation. Once profits are high enough, splitting income into a reasonable salary plus distributions can save meaningful self-employment tax, since distributions aren’t subject to the 15.3% SE tax.

How we use it: The S election usually makes sense once net profit clears roughly $40k–$80k, after weighing payroll costs and the QBI deduction. We model the break-even before electing.

Physical nexus comes from an office, employees, inventory or property in a state. Economic nexus, established after the 2018 Wayfair decision, is triggered by sales volume alone. Most states use $100,000 in sales, and some still add a transaction count.

For individuals, nexus shows up as multi-state income tax when you work, own rental property or hold a business interest across state lines. One remote employee can create income tax and payroll nexus for an employer in that worker’s state.

How we use it: Each state sets its own threshold, sourcing rules and apportionment formula. We map your 50-state footprint, register where required, and use voluntary disclosure to limit back-period exposure.

Move mid-year or split time between states and you’ll likely file as a part-year resident in each, allocating income to the period you lived there. Living in one state and working in another means a nonresident return in the work state and a resident credit at home.

Watch the statutory residency trap: more than 183 days in a state like New York while keeping a permanent home there can make you a full resident, taxed on all income.

How we use it: Day-count tracking and domicile documentation are essential if you have homes in more than one state. High-tax states audit residency aggressively, and the burden of proof is on you.

New Jersey’s Business Alternative Income Tax, and the similar pass-through entity taxes most states now offer, lets an S-Corp or partnership pay state income tax at the entity level. That tax is fully deductible federally, sidestepping the individual SALT cap.

Owners then claim a credit on their personal New Jersey return for their share. For profitable pass-throughs, the federal savings can reach thousands per owner each year.

How we use it: The election, the estimated payments and the credit on each owner’s return must line up exactly, or owners overpay. We handle them as one process.

Federal estate and gift tax share a single lifetime exemption, above which a 40% rate applies. You can also give up to the annual gift exclusion per recipient each year without using any of it.

The exemption is historically high: $15 million per person for 2026 under the 2025 tax law, indexed for inflation after that. New Jersey no longer has an estate tax but still imposes an inheritance tax on transfers to certain non-lineal beneficiaries.

How we use it: Lifetime gifting, valuation discounts and trust structures can move appreciating assets out of a taxable estate. We coordinate the tax side with your estate attorney so the plan holds together.

A trust or estate that earns income generally files Form 1041. Income is taxed either to the trust or to the beneficiaries who receive distributions.

Trust brackets are compressed and reach the top rate at a very low income, which makes the timing of distributions a real planning lever.

How we use it: We prepare 1041s and model accumulating income in the trust against distributing it, so families don’t overpay simply because of where income lands.

Transferring a business to children, partners or a buyer brings some of the most consequential tax decisions an owner ever faces. The deal structure decides whether gains are capital or ordinary, how much estate and gift tax applies, and whether a basis step-up is captured.

Gifting shares over time, grantor trusts, installment sales and buy-sell agreements each produce very different results.

How we use it: Combining tax and fractional CFO work, we model the after-tax outcome of each path years ahead, so the transition happens on your terms.

Ultra-high-net-worth families rarely have simple returns. Wealth sits across partnerships, S-Corps, trusts, real estate in several states and sometimes foreign holdings, each with its own filings, basis tracking and state sourcing.

The risk is rarely one big mistake. It is the cumulative drag of uncoordinated entities, missed elections and state exposure nobody mapped.

How we use it: We act as the quarterback across your attorney, advisor and entities, consolidating the tax picture so nothing falls between jurisdictions.