High Earners Are Using These 4 Strategies To Reduce Their 2026 Taxes

[00:00:00]If you have income that you do not want to pay tax on, then you will want to look deeply into one of the four strategies that I'm about to share with you. A lot of people do not know this, but there are vehicles that you can park your income into to protect it from being taxed at all. There are certain accounts, entities, and properties that can act as a shell to reduce your taxes as you earn income, invest, and build wealth. And today I'm going to show you the exact framework that I have personally used to save individuals over $12 million in taxes as a licensed CPA at mycpacoach.com.

[00:00:43]So, let's jump right into it.

[00:00:47]Okay, so if someone comes to me and says they want to pay less taxes, there are four places that I can always go to to find tax savings, and every single time at least one of these work. First, I always start with bucket number one, deferring income. This is the easiest, simplest, and most traditional way to reduce your taxes. If you have income that you do not want to pay tax on, you can just defer it. When you defer your income, the portion you defer is not taxed, not immediately anyway. It's like we're pushing income off of our taxes this year, and we're choosing to pay taxes on it at a later date. Now, the goal of deferring income is not to never pay taxes. It is to trigger the lowest amount of taxes on our income as possible. For example, if you are in a 37% tax bracket today and will be in a 12% bracket when you retire, you would essentially save 25% in taxes by deferring your income. That's $25,000 on every $100,000 deferred. But how exactly do you defer your income? The IRS makes this very easy and has designated tax deferred accounts that you can use like traditional IRAs, 401(k)s, pensions, and even HSAs. You might use a combination of these accounts or one powerful one like a cash balance plan for example that allows some individuals to defer up to $300,000 in one given year. But once you explore your options there, you can move on to bucket number two, rental real estate, which is one of the best tax shelters in the world. So many high income earners park a portion of their incomes into real estate to preserve their wealth while reducing their taxes at the same time. Real estate appreciates in value, generates cash flow, and very large deductions that people use to offset other income on their tax returns every single year. So on one hand, you could be cash flow positive on the year, and then on the other hand, you have this very big loss on paper when you file your taxes, making this strategy one of the best ones to use in the entire tax code. And it's largely due to one simple concept, depreciation. This is a non-cash expense that the IRS allows you to deduct against your property value every single year. And there are ways to use the new depreciation rules to write off up to 20 to 30% of your property in one given year. For example, if you bought a $400,000 rental property, you could potentially write off $120,000 of depreciation in the year you bought it and placed it into service. And if you meet certain IRS requirements, you may be able to use that deduction against other income on your tax return like your W-2 or business income for example. Once you figure this out, you can scale this to reduce your taxes by however much that you are willing to invest. I have clients who do nothing else but implement this strategy every single year. They earn income, use what is left to buy real estate, and accelerate their depreciation to offset other income on their taxes. But, you can do this and more in bucket number three, business ownership, which offers some of the greatest tax advantages available in the entire tax code. And believe it or not, you do not have to own a Fortune 500 corporation in order to use them. A lot of these benefits can be taken advantage of with something as simple as a side gig. So, here's how it works. When you invest dollars into a business, those dollars can be tax deductible and even eligible for tax credits depending on how those dollars are being used. For example, let's say you start a business and you spend money on advertising, equipment, software, and other professional services to get it off the ground. Well, the IRS would allow you to write off every single dollar of those expenses. And if you're doing things like researching and developing new products or services, you might even be eligible for tax credits like the R&D tax credit on top of all of this. Then on top of that, you also benefit from the fact that business owners are able to take more deductions in general. You can deduct large portions of everyday expenses you already have as a business owner like housing, vehicles, travel, meals, and more when those expenses have legitimate business purposes. Then, when you do start showing a profit, you get an immediate discount on your taxes with the 20% QBI deduction, which allows business owners to only pay taxes on 80% of their qualifying income. Not to mention the fact that the IRS allows business owners to save in many other ways. There are income shifting strategies, investment strategies, depreciation strategies, and even entity strategies that you can pursue to further reduce your taxes within a business. When you own a business, you have a vehicle that you can invest in, not just to build wealth, but to reduce your taxes at the same time. But, it is not the only way. You can also park portions of your income into bucket number four, your own charitable entity, like a nonprofit or private foundation.

[00:06:33]When you see professional athletes, celebrities, politicians, and wealthy individuals donating their own money to their own nonprofits or foundations, it usually isn't just about philanthropy.

[00:06:45]They're getting huge tax deductions by doing this. These entities are practically tax shelters that are protecting their income from ever being taxed. If you have income that you do not want to pay tax on, and you plan to be involved in any charitable activity, even if it's just giving money to your church, then parking portions of your income into your own charity could make a lot of sense for a few reasons. Number one, the moment you donate your money to this entity, it will be treated as a charitable tax deduction, which is going to immediately reduce your taxes.

[00:07:23]Instead of receiving small charitable deductions as you donate money every year, you can put aside more money in advance into your own giving entity to trigger all of these deductions up front. And then number two, you can make investments inside your own charity, which would be exempt from being taxed at all because charities are tax-exempt entities. And number three, you are allowed to take wages from your own foundation and even hire your own family members, which gives you a mechanism to withdraw dollars from your foundation in an IRS-compliant manner. Now, to be clear, you do have to conduct some type of charitable activity with these entities. If you set up a private foundation, for example, you do have to donate a certain percentage of your assets every year. And if you set up an actual nonprofit, you do have to actually conduct charitable activities.

[00:08:22]Nonetheless, if you have the right reasons, this can be a great place to park income, generate wealth, and reduce your taxes at the same time. But ultimately, if you are looking for ways to reduce your taxes, just start out by picking one of these four areas to lock in on. Deferring your income, business ownership, real estate, or charitable entities. The tax benefits available in any one of these buckets can be so large that it can reduce your taxes down to zero while preserving your wealth at the same time. If you enjoyed this video, make sure you subscribe for even more ways to reduce your taxes. And if you need immediate assistance implementing a plan that is guaranteed to reduce your taxes, just apply to work with my team today at mycpacoach.com.