What are some Easy Tax Deductions for Middle to High Income Earners?

Clients often ask us why their tax refund is so small or why they owe more than expected. Everyone, whether you’re a middle-income earner or a high-income earner, wants to save on their taxes. That being said, a little tax planning can go a long way. Tax deductions for high earners may seem complicated but we’ll break it down for you.

Here are effective strategies to help you keep more of your hard-earned money.

Retirement Contributions:

The involvement of retirement accounts may seem complex, but here are effective tax deductions for high earners to lower their taxable income. 

• Contributing to a traditional 401(k) and 403(b) plan: For 2025, you can contribute up to $23,500 on a pre-tax basis to these employer-sponsored plans. If you are age 50 or older, you can make an additional “catch-up” contribution of $7,500, bringing your total to $31,000.
• Contributions to traditional IRAs can also be tax-deductible; however, there are income phase-out limits. The 2025 contribution limit for individuals is $7,000 and $8,000 for those 50 and older.
• High-income earners who exceed income limitations for Roth IRA contributions can plan to use Backdoor Roth IRA conversions. It allows you to make a non-deductible contribution to a traditional IRA and convert it to a Roth IRA as long as you have no pre-tax IRA balances. Those with an employer’s 401(k) plan that offers after-tax contribution options, a “mega” backdoor Roth conversion allows for contributions up to the overall 401(k) limit ($70,000 in 2025 for those under 50)

Now that you know how retirement accounts can help, what about your other expenses? Let’s explore how itemizing your deductions can help further lower your taxable income.

Itemized Deductions:

If your unreimbursed expenses exceed your standard deduction, here are common unreimbursed expenses you can deduct:

• If you have medical and dental expenses that aren’t covered by insurance, you can itemize your expenses if they’re over 7.5% of your adjusted gross income (AGI).
• Your property taxes are deductible under the state and local tax deduction (SALT). From 2025-2029, this deduction is capped at $40,000 for those with an AGI under $500,000. For those with an AGI of $500,000 or more, the cap is $10,000. After 2029, the cap will be $10,000 for everyone.
• The interest you pay on your home mortgage (Form 1098) is deductible.
• You can deduct losses from natural disasters, theft, or other casualties.

By keeping track of these significant expenses throughout the year, you can determine if itemizing is the right choice for your tax situation. This careful record-keeping could lead to a lower taxable income and bigger tax savings.

Charitable Contributions:

Giving back feels good, and with a little planning, it can also provide benefits! If you’re thinking about making a charitable contribution, here are user-friendly tips to assist with tax deductions for high earners.

• You can deduct up to 60% of your adjusted gross income (AGI) to a qualified charitable organization.
• You can deduct the fair market value (FMV) of donated property. If it has increased in value, you will need to adjust your FMV. 
• You can donate capital assets, such as stocks, which can provide a double tax benefit by avoiding capital gains tax and deducting the full FMV of the asset. 
• If you contribute to a donor-advised fund (DAF) that is sponsored by a public charity, you receive an immediate tax deduction. Your assets in the DAF grow tax-free.

We always advise taxpayers to obtain proper documentation from the charity, especially for non-cash contributions over $250. For donations over $5,000, a qualified appraisal may be required, and you’ll need to file IRS Form 8283.

Self-employed and Business Owners:

Self-employed individuals and small business owners have unique opportunities to reduce their taxable income by deducting eligible business expenses. As a reminder, the IRS defines deductible business expenses as expenses that are “ordinary and necessary” for business operations. 

With this in mind, utilizing a Simplified Employee Pension (SEP) IRA is another retirement savings option that offers higher deductible contribution limits (up to $70,000 or 25% of net earnings for 2025) and tax benefits. This is a great tax deduction for high earners if you contribute to your SEP IRA during the tax year to reduce your taxable income. 

Nonetheless, here are other key deductions for those who are self-employed to remember:

• Home office deduction
• Vehicle expenses
• Business travel and meals
• Accounting and legal fees
• Advertising and marketing costs
• Education and training for your business

Overall, be sure to keep records of all your business expenses. 

Long-term Strategies

Beyond your general direct tax deductions, here are a few other strategies to consider for your savings and investments.

• Health Savings Accounts (HSAs) offer a unique “triple tax advantage”: contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free.
• 529 plans provide a valuable educational savings option; the funds grow tax-deferred, and qualified withdrawals used for eligible education expenses – including tuition, fees, and room and board for higher education, and in certain cases, K-12 tuition – are entirely tax-free.
• Utilize tax-loss harvesting, which is selling investments at a loss to offset any realized capital gains, and potentially deduct up to $3,000 against ordinary income annually. Any excess losses can be carried forward to future tax years.
• Invest in municipal bonds, as the interest income generated from these bonds is typically exempt from federal income tax, and often from state and local income taxes if you reside in the issuing state.
• Tax residency planning can be helpful in establishing residency in a state that has lower or no individual income tax, such as Texas or Florida, if such a move is possible for your lifestyle and circumstances.

Although these recommendations will take effect over time, they can assist in reducing your tax burden exponentially as well as provide many tax deductions for high earners.

Ready to put these strategies to work?

Now that we went over tax deductions for middle to high earners, don’t let tax season catch you off guard. These strategies will lead you to a smaller tax bill. The key is taking it one step at a time and consulting with a tax professional if you have any questions during tax time. We’re here to do the heavy lifting to maximize your tax refund come tax time.

We offer tax professional and CPA services for extra assistance. When you’re ready to file, let our website ensure you don’t miss a single deduction!

This entry was posted on Tuesday, August 12th, 2025 at 3:27 am and is filed under Tax Tips and Tricks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.