What High-Income Earners Can Do to Pay Less in Taxes

A 36-year-old software engineer recently posted a screenshot of his annual income in the Salary subreddit. His gross pay is $333.6k per year, but he’s paying more than $75k in taxes each year. In the end, he nets more than $250k annually.

Earning a high income is often a sign of career success, but it can also come with a steep tax bill, which can feel defeating after all the hard work. As your income rises, so does your exposure to higher tax brackets, phaseouts, and fewer straightforward deductions. Many high earners find themselves wondering if there are legal ways to reduce what they owe without taking on unnecessary risk or complexity.

The good news is that tax planning becomes more powerful (not less) as your income grows, despite the way it may feel at times. There are several ways to improve your overall tax efficiency, from maximizing retirement contributions and using tax-advantaged accounts to exploring investment strategies and timing income more effectively. The key is understanding which strategies actually apply to your situation and which ones are often misunderstood.

This post was updated on April 1, 2026.

Contribute to a Traditional IRA

The Redditor already puts $23k into his employer’s retirement account. He can also open a traditional IRA and contribute up to the annual limit, but whether that contribution is tax-deductible depends on his income and whether he’s covered by a workplace retirement plan. You eventually have to pay taxes on it when you withdraw your funds, but the software engineer will likely have a lower income when he retires.

You can open a traditional IRA while contributing to an employer’s retirement account. However, direct Roth IRA contributions are generally unavailable at this income level, although some high earners use a backdoor Roth IRA strategy. A conversion from a pre-tax traditional IRA to a Roth IRA can trigger taxes, but the tax impact depends on whether the IRA contains deductible or nondeductible contributions.

Invest in Real Estate

Buying real estate is one of the best ways to grow your wealth and lower your taxes at the same time. Rental real estate can generate depreciation deductions, but whether those deductions actually reduce your current tax bill depends on your tax situation and the passive activity rules. Some investors use cost segregation studies and bonus depreciation to accelerate depreciation on certain components of a property, but this is not the same thing as simply deducting the full value of a rental home. In some cases, accelerated depreciation can create large paper losses, but most investors cannot simply depreciate an entire rental property in one year.

Investors who use a cost segregation study may be able to accelerate depreciation on qualifying portions of a property can proceed to buy one property each year. Under the right circumstances, real-estate tax strategies can reduce taxable income, but they are complex, heavily rule-dependent, and not guaranteed to offset W-2 income.

The only catch with this strategy is that you have to stay on top of multiple properties. However, the software engineer seems to have a sufficient income to work with a property management team. He paid $75k in taxes in 2024, so following this strategy and depending on financing, depreciation, income, and tax treatment, real estate may provide tax advantages, but projected savings should be modeled with a CPA rather than assumed.

Research Tax Credits and Deductions

Some tax credits are available for specific purchases or activities, but they often come with income limits, vehicle eligibility rules, and expiration dates. Tax credits usually reduce your tax bill more directly than deductions, but the value depends on the type of credit and your tax situation.

You can either research tax credits on your own or speak with a tax professional to make sure you are capitalizing on all available options.