Income tax strategies

Targeted strategies for $1M+ W2 households in California.

Strategies are evaluated on identical dimensions for direct comparison. All modeled figures use a $1.5M California W2 household income, married filing jointly, single high-income year, no existing planning.

Advanced strategies

These deliver immediate net cash benefit. Tax savings exceed implementation cost in the year of action.

Foundational strategies

These reduce specific W2 exposures through targeted investment and deferral. Most require capital commitment.

Financing Deductions

Advanced Strategy

Generates a large current-year charitable deduction while preserving liquidity and making a permanent charitable gift.

In qualifying high-income years the strategy produces tax savings that exceed implementation costs in the year of execution.

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Modeled at $1.5M household income

Tax savings ~$415K

Net cash position +$190K

Benefit timing Current year

Equity Compensation Planning

Advanced Strategy

Advanced planning for significant equity compensation grants.

Standard vesting and exercise timing is the baseline. Material outcomes require multi-tranche sequencing, tax optimization across ISOs, NQSOs, RSUs, and restricted stock, and coordination with liquidity events. Each situation demands individual specialist evaluation.

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Who should consider this

Large aggregate grant value

Equity grants valued above $1M in aggregate where standard timing leaves material tax exposure.

Multi-year vesting with open planning window

Multi-tranche schedules with upcoming cliff or vesting dates where sequencing decisions remain available.

Pre-IPO or acquisition within 12–24 months

Liquidity events where exercise and holding decisions have irreversible tax consequences.

Equity vesting in a high-income year

Compensation events that will stack on top of salary, bonus, or other equity vests in the same year.

Foundational strategies

Each strategy addresses a distinct element of W2 tax exposure. Most require capital commitment. The tax benefit follows directly from the investment decision.

401(k) & Deferred Compensation

Pre-tax deferral of salary and bonus income. Reduces federal taxable income immediately. NQDC plans defer up to 100% of bonus depending on plan design.

Backdoor Roth / Mega Backdoor Roth

Restores access to tax-free growth for households above Roth income limits. Backdoor uses non-deductible IRA contributions. Mega uses after-tax 401(k) contributions.

Section 83(b) Election

Locks in ordinary income tax at grant-date value on restricted stock. Converts future appreciation to long-term capital gains. Must be filed within 30 days of grant.

Donor-Advised Fund

Bunches charitable giving into a high-income year to maximize the deduction at peak marginal rates. Allows grant distributions to charities over multiple years.

Short-Term Rental

Generates passive losses through bonus depreciation that offset W2 income under material participation rules. California does not conform to federal bonus depreciation.

Oil & Gas — Intangible Drilling Costs

Provides immediate ordinary income deductions via intangible drilling costs in the year drilled. Offsets W2 income at full federal and California rates, subject to structure and EBL limits.