Why Is Year-Round Tax Planning So Important?
By Matt Held, CFP®
Most American taxpayers might get away without year-round tax planning. However, my clients aren’t average taxpayers. Many of the people I work with are GE and P&G executives with complex equity compensation. That equity compensation (along with other income streams) makes taxes challenging.
If you’re an executive or other high-earning professional, having a personalized year-round tax planning strategy is vital. Take a closer look at some common tax strategies and how they could help reduce your tax bill.
Why High Earners Need a Year-Round Tax Planning Strategy
- A few key reasons why year-round tax planning is essential for high earners include:
- Year-round monitoring helps you accurately pay estimated taxes and avoid penalties.
- It reduces your chances of missing critical deadlines.
- It lets you identify and plan for potential deductions (e.g., like the SALT deduction cap of $40,400) while also accounting for the ways in which phase-outs could limit the amount of the deduction you can claim, depending on your income threshold.
- It allows you to strategically direct money to your retirement accounts.
An experienced advisor can help you get a clearer picture of your finances as you lay out your year-round tax planning strategy.
Strategies for Year-Round Tax Planning
Rather than waiting until tax season, these year-round tax planning strategies can help you stay ahead and make more informed decisions along the way.
Maximizing Retirement Plan Contributions
Contributing the maximum allowable amount to retirement plans is a great way to help manage tax liability. If you have a 401(k), 403(b), or 457(b), the standard maximum contribution you can make is $24,500 for 2026.
If you are at least 50 years old, you may qualify to make additional catch-up contributions. The amount of the catch-up depends on your age:
- Age 50+: $8,000
- Age 60 to 63: $11,250
However, there’s an important caveat. For people who earn more than $150,000 per year, these catch-up contributions must be made on a Roth basis.
Bunching Deductions
Charitable giving can be a great way to make a difference in the world while managing tax liability. If you anticipate earning more than usual this year and want to make the most of your charitable efforts, you might consider “bunching” deductions.
This is when you combine multiple years’ worth of deductions into one tax year. If you’re interested in bunching, consider talking to a financial advisor about the timing of deductions.
Monitoring Taxes on RSUs and Stock Options
Restricted stock units (RSUs) are often part of equity compensation. However, when RSUs vest, you may be hit with immediate tax liability.
When RSUs vest, many employers withhold federal income taxes at the default supplemental wage rate of 22%. However, executives could be in a higher tax bracket, which could lead you to fall short of what’s actually owed.
If you have an advisor to help with year-round tax planning, consider discussing whether to sell a portion of the stock to cover taxes, hold the shares, or do something else.
Gathering Documents Early
Don’t wait until the last minute to gather necessary tax documentation. Some of the most important documents to look out for:
- W-2 statements
- Forms 1099-NEC and 1099-MISC for other income
- Forms 1099-DIV (dividend income), 1099-INT (interest income), and 1099-B (brokerage income)
- RSU and non-qualified stock option records
- Schedule K-1
The above list isn’t an exhaustive one. If you receive a document related to taxes or finances, keep it in a safe place! This seemingly simple step may make taxes far less stressful.
Need Help With Year-Round Tax Planning?
The year-round tax planning strategies listed above offer a starting point. However, because no two people have identical tax situations, you might consider getting in touch with an advisor before building your own strategy.
The team at Clarity Wealth Management is committed to supporting the holistic financial health of all our clients. Since 2012, we’ve helped GE executives and other professionals align their finances with their visions for the future.
Interested in a no-obligation, icebreaker call? Schedule online here, call (513) 278-9420, or email Info@ClarityWealth.org.
Frequently Asked Questions
What is year-round tax planning, and why does it matter?
Year-round tax planning is the ongoing process of reviewing your income, investments, and tax strategies throughout the year, not just during tax season. For high earners, this approach can help reduce tax liability, avoid penalties, and uncover opportunities to improve overall financial efficiency. Clarity Wealth Management can help you stay proactive with a personalized, year-round tax planning strategy.
Who benefits most from year-round tax planning?
Year-round tax planning is especially valuable for executives and high-income professionals with complex financial situations, such as equity compensation, multiple income streams, or business interests. These factors can create tax challenges that require consistent monitoring and strategic decision-making. Clarity Wealth Management can help you navigate complexity and make informed tax decisions throughout the year.
What strategies are involved in year-round tax planning?
Common year-round tax planning strategies include maximizing retirement contributions, timing charitable deductions, managing taxes on equity compensation like RSUs, and tracking important tax documents. The goal is to make informed adjustments as your financial situation evolves, rather than reacting at the last minute. If you’re looking for a financial partner to help you implement and adjust these strategies to support your long-term financial goals, reach out to us as Clarity Wealth Management.
About Matt
Matt Held, CFP®, is the lead advisor and a founding partner of Clarity Wealth Management in Cincinnati, OH, where he has specialized in guiding corporate executives and business owners through complex retirement and tax planning since 2006. An Ohio State alumnus and multi-year Five Star Wealth Manager, Matt focuses on delivering personalized strategies that help clients simplify equity compensation and navigate major financial decisions with confidence. Outside of work, he is a dedicated family man and sports enthusiast who remains deeply committed to the long-term success and clarity of the households he serves.
Clarity Wealth Management is located at 4243 Hunt Road, STE 429 Cincinnati, OH 45242. (513) 278-9420
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth.
Clarity Wealth Management does not offer tax advice. You should consult a tax professional regarding your individual situation.
*2013-2018 and 2020-2024 Five Star Wealth Manager Award, created by Five Star Professional. The 2024 award was presented in September 2024 based on data gathered within 12 months preceding the issue date. Advisors pay a fee to hold out marketing materials. Not indicative of advisor’s future performance. Your experience may vary. For more information, please visit www.fivestarprofessional.com.
