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At this moment, I’m preparing to do my taxes again. Every year I file an extension (Oct 15 deadline) because of delayed K-1s from private fund investments. So when Empower reached out about highlighting tax planning mistakes for high earners, I agreed. It’s a topic I know all too well.
What I didn’t realize is that Empower offers tax planning as part of its standard client service. No extra invoices, no $300/hour CPA bills. Just integrated advice, included in the management fee. Considering that taxes are often the single largest expense for high-income earners, having proactive strategy baked in is a big deal.
The Importance Of Tax Planning For High Income Earners
When you’re a high earner—think $250,000+ income or the potential to get there—you’ve probably got a lot on your plate: investments, real estate, maybe a business or two. What you might not be paying enough attention to? Tax planning.
It’s not sexy like a moonshot AI stock, but the compounding effect of smart, consistent tax moves can rival investment returns over time. As Empower Personal Wealth specialist Scott Hipp, CPA, CFP® explains, for high-income, high-net-worth clients, tax planning isn’t about chasing one-off loopholes, it’s about proactive, coordinated, year-round strategy.
Let’s dive into four key questions Scott answered that reveal just how much value smart tax planning can deliver. If you’re searching for a financial professional to manage your wealth, choosing one that integrates tax planning into their service is essential, not an add-on.
Empower has been a long-time affiliate partner of Financial Samurai, and I personally consulted for Personal Capital (later acquired by Empower) from 2013 to 2015. I’ve seen firsthand how incorporating tax strategy into wealth management can meaningfully boost long-term returns.
1. Why is tax planning critical for high earners?
When you’re in the top federal tax brackets—32%, 35%, or 37%—every strategic move counts more. Saving 1% on taxes for someone making $100K is nice. Saving 1% for someone making $800,000? That’s four first-class tickets to Hawaii with a couple thousand left over.
Scott says most people think of tax planning as a once-a-year scramble or a hunt for magical loopholes (“I heard Uncle Bob pays zero taxes because he made his dogs employees…”). The truth: the biggest gains come from small, consistent, legal moves year after year.
It’s like The Shawshank Redemption: pressure and time. Maxing out a health savings account, backdoor Roth contributions, charitable “bunching,” and tax-loss harvesting may seem minor in isolation, but over 20 years, they can carve a serious tunnel toward financial freedom.
Here’s the danger: by the time you file in April, most opportunities are gone. If you’re filing 2025’s taxes in April 2026, your deadline for most strategies was December 31, 2025. That’s why Empower’s team works year-round—advisors and tax specialists meet regularly to tweak and optimize before the clock runs out.
2. What’s the deal with the SALT deduction changes?
The State and Local Tax (SALT) deduction cap got a temporary boost after the passage of The One Big Beautiful Bill Act on July 4, 2025. It’s $40,000 in 2025 (up from $10,000), rising slightly each year until 2029, before reverting in 2030.
Who benefits? Mostly taxpayers with AGI under $500K in high-tax states. Hit $600K AGI, and the expanded cap phases out completely.
But even high earners over $600K aren’t out of luck—if you own a pass-through business (S-corp, partnership, LLC taxed as such), you might use the Pass-Through Entity Tax (PTET) workaround. Here, the business pays state taxes, making them fully deductible federally, and you get a state tax credit. As of 2025, 35+ states have a PTET option.
For the right clients, SALT changes + PTET can unlock deductions worth tens of thousands—money that stays in your portfolio instead of the IRS’s coffers.
3. How does Empower approach complex high-earner situations?
Let’s say you’re a business owner with significant investment income, passive rental income, and real estate holdings.
With Empower, you basically have a “tax specialist on demand” baked into your fee – no surprise bills. The process starts with:
- Reviewing the past three years of returns for missed opportunities. (You’ve got three years to amend and claim a refund.) Empower can spot thousands in overlooked deductions.
- Holistic planning based on your goals. Tax strategy isn’t in a vacuum—it’s tied to your investment plan, estate goals, and cash flow needs.
Common missed opportunities for self-employed clients:
- Not deducting health insurance premiums.
- Missing the Qualified Business Income (QBI) deduction.
- Ignoring home office deductions.
More common errors Empower can help catch:
- Capital loss carryforwards lost when switching preparers/software
- Incorrect Backdoor Roth processing
- Missed Foreign Tax Credit
- Wrong cost basis for stock sales (ESPP, options)
- HSA distributions taxed in error
From there, Empower looks forward—maybe setting up a solo 401(k), timing income, or planning capital gains. The idea is to create an ongoing tax playbook, not just fix past mistakes.
4. What real-world tax savings have clients seen?
Missed health insurance deductions are surprisingly common—and costly.
- S-Corp owner: CPA added health insurance premiums to W-2 wages (correctly) but never told the client they could deduct those premiums above the line. Amending three years’ returns saved ~$6,000 in federal taxes.
- Sole proprietor: Deducted health insurance as a Schedule A itemized deduction, but couldn’t benefit due to medical expense thresholds and not itemizing at all. Amending saved ~$7,500.
- Medicare premiums: Many don’t know they qualify as self-employed health insurance deductions. Catching this can save $1,000+ per year.
These aren’t flashy hedge-fund-like wins—but they’re guaranteed returns via tax savings, often compounding over years.
Key Strategies Empower Uses for High Earners
Scott shared a few proactive moves that come up again and again:
Bunching Charitable Contributions
Standard deduction in 2025: $15,750 (single) / $31,500 (married). By combining two or more years of donations into one tax year, you can exceed the standard deduction, itemize that year, and take the standard deduction the next—resulting in a bigger total deduction over time.
Bonus: Donate appreciated assets or use a Donor-Advised Fund for even more efficiency.
Tax Loss Harvesting
Selling investments at a loss to offset gains elsewhere—then reinvesting in similar (but not “substantially identical”) assets—can lower your current-year tax bill while keeping your portfolio allocated. All Empower Personal Strategy clients ($100K+) minimize your tax burden with proactive application of tax-loss harvesting and tax location.
Roth Conversions
Moving funds from a traditional IRA to a Roth IRA lets you lock in today’s tax rate if you expect to be in a higher bracket later. Future withdrawals? Tax-free. This is especially powerful in lower-income years before RMDs kick in.
Saving Money On A Good CPA
A good CPA might charge $150–$400/hour just for tax consultations. Meanwhile, many don’t offer proactive planning at all, focusing instead on compliance and filing.
Empower builds tax planning into its overall wealth management service for clients with $100K+ in investable assets. That means:
- One fee, one integrated plan.
- Advisors and tax specialists in the same room (or Zoom) all year.
- Proactive calls before the deadlines—not “we’ll see you next April.”
The Bottom Line
Big investment wins get the headlines, but year after year, quiet, boring, proactive tax moves can be worth just as much, sometimes more. For high earners, ignoring tax planning is like leaving compounding on the table.
If you’ve got $100K+ in investable assets, Empower is offering Financial Samurai readers a free consultation. Even if you’re confident in your current plan, a second opinion could uncover thousands in missed opportunities.
For a limited time only, book your free, no obligation session here. An Empower professional will review your investments and net worth, and offer some suggestions on where you can optimize, all for free.
Empower’s Tax Optimization Services
Tax optimized investing (tax loss harvesting, tax location, tax efficiency): available to clients investing $100K+.
Tax planning guidance (analysis and recommendations – identify gaps and opportunities in your tax strategy before you file with your advisor and tax specialist): available to $250K+.
At $1M+, clients receive the above, in addition to access to a CPA, at no additional cost.
Disclosure: This statement is provided by Kansei Incorporated (“Promoter”), which has a referral agreement with Empower Advisory Group, LLC (“EAG”). Learn more here.
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