How to Lower Taxes as a High Earner
If you're a high-income earner in Phoenix Arizona, especially a business owner, entrepreneur, or top-performing professional, lowering your tax bill is likely a top priority. At Cool Wealth Management, we help high earners reduce taxes legally and efficiently. With the right tax planning, you can keep more of what you earn, reinvest in your future, and build long-term wealth. This article walks you through proven ways to lower your taxes without cutting corners.
Choose the Right Business Structure
How your business is structured has a big impact on how much you pay in taxes. Many high earners start as sole proprietors or single-member LLCs and unknowingly pay more in self-employment taxes than necessary.
Here are a few structures that can help:
S Corporation
Allows you to split income between salary and distributions. This reduces the self-employment tax burden.
Partnership or Multi-Member LLC
Useful for splitting income strategically. It also opens up more flexible tax reporting options.
C Corporation
Less common but can help defer income and unlock certain benefits like fringe deductions.
Talk to a financial advisor and a CPA to determine the right structure for your goals.
Max Out Retirement Contributions
As a high earner, you have access to retirement strategies that can significantly lower your taxable income:
Solo 401k
Contribute up to $69,000 in 2024 if you are 50 or older.
SEP IRA
Ideal for business owners without employees.
Defined Benefit Plan
Designed for very high-income individuals. Allows six-figure annual contributions.
Backdoor Roth IRA
A creative strategy for those over the income limit, but it must be executed carefully.
These accounts offer powerful tax deferral and long-term savings potential.
Use Tax-Efficient Investing
The wrong investment strategy can increase your tax bill. Here are some ideas to consider:
Tax Loss Harvesting
Offset gains by selling underperforming investments.
Municipal Bonds
Interest income is often exempt from federal and state income tax.
Asset Location
Place tax-inefficient investments in tax-deferred accounts and keep tax-efficient investments in taxable accounts.
Opportunity Zones
Investing in qualified areas allows you to defer and potentially reduce capital gains taxes.
This kind of planning ensures your portfolio is working for you, not against you.
Deduct Business Expenses Strategically
Many business owners underutilize legal deductions. Here are some commonly missed opportunities:
Home office expenses
Business travel and meals
Marketing and software tools
Health insurance premiums
Family payroll (when structured properly)
Accurate record-keeping is essential, but these deductions can lead to major tax savings.
Open a Health Savings Account
An HSA is one of the most tax-advantaged accounts available. It offers three key benefits:
Contributions are tax-deductible
Growth is tax-free
Withdrawals for medical expenses are tax-free
For high earners with a high-deductible health plan, this account doubles as a retirement tool if used strategically.
Work With a Proactive Advisor
The biggest mistake high earners make is only thinking about taxes during tax season. CPAs often focus on filing, not planning.
At Cool Wealth Management, we help you:
Optimize how income is paid and taxed
Layer in tax-efficient investing
Coordinate with your CPA throughout the year
Tie tax savings to bigger wealth goals
When your advisor and tax professional work together, the savings add up.
Plan for Estate and Legacy Taxes
Estate planning is often overlooked by high earners. But with current exemption limits changing soon, proactive planning matters more than ever.
Tools like trusts, gifting strategies, and family entities can protect your legacy and reduce future tax exposure.
Final Thoughts
You do not need aggressive tax tricks to save money, you need a clear, coordinated strategy. Whether you are building a business, growing your investments, or preparing for retirement, smart tax planning is one of the most valuable tools available.
If you are ready to lower your tax bill and create a more efficient financial plan, schedule a call with Cool Wealth Management. Let us help you keep more of what you earn and put it to work for your future.
