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More tax deductions aren’t always better. The real opportunity is understanding where your income falls within the tax code—and strategically positioning yourself to take advantage of the incentives available to you.
In this episode, we break down the “sweet spots” of tax planning for high-income entrepreneurs and investors. From tax brackets and the Qualified Business Income deduction to state and local tax deductions, retirement strategies, cost segregation, and oil and gas, you’ll learn why one strategic deduction can potentially unlock additional tax benefits.
What You’ll Learn
- Why understanding your taxable income and marginal tax brackets is critical to proactive tax planning
- How deductions can potentially interact with incentives like QBI, state and local tax deductions, and child tax credits
- Why the goal of tax planning isn’t simply maximizing write-offs, but finding the right tax-efficient position for your specific situation
One of the biggest lessons from this episode is that tax strategies shouldn’t be evaluated in isolation. Your income level can influence your tax bracket as well as your eligibility for certain deductions, credits, and incentives. A deduction that lowers taxable income may therefore have additional effects elsewhere in your tax picture.
This episode covers tax strategy, tax planning, wealth strategy, tax-efficient investing, high-income earners, entrepreneurs, business owners, qualified business income, tax deductions, oil and gas investing, cost segregation, retirement accounts, alternative investments, and proactive wealth planning.
Being aware of where you stand in these brackets, and among these different sweet spots, and what applies to you, is going to be super helpful in making key decisions about which strategies are available and how valuable they are given the tax impacts. So what I want to talk about today is what we’d call the sweet spots in the tax code.
You may already be aware of things like cash balance plans, retirement accounts, cost segregation, and oil and gas, and there are other strategies out there too. But you may be wondering: how much should I put into these strategies, and where do I want to land, so I’m not overspending? I don’t want to buy a G-Wagon I don’t need just to take on debt for a write-off, and I don’t want to end up in a place where I don’t even need the write-offs anymore. But I also want to do enough tax planning to put myself in a position to take advantage of certain incentives, and not miss out on anything.
You can overdo tax planning and end up paying too much just to chase incentives, but you can also drive your income too low and it becomes overkill. So we’re going to talk about navigating that sweet spot: where there are all these incentives, but you don’t make so much that you get phased out, and you don’t make so little that you lose access to them.
One of the first things I want to touch on is a quick look at the 2026 tax brackets. If you’re listening to this in 2027, they probably haven’t changed much beyond inflation adjustments. One thing you’ll notice is the biggest jump in tax brackets happens once your taxable income, if you’re married filing jointly, crosses $400,000: you jump from 24% to 32%. If you’re single, that threshold is about half that amount.
When we do tax planning, what we try to do, as best we can, is keep income out of that 32%-and-up bracket. We treat it almost like a danger zone. You’ll keep seeing this $400,000 figure show up as we go further into how the tax law is built, and even in how politicians talk about what counts as “making too much.” Once your income crosses $400,000, a lot of opportunities start disappearing. So we try to find a way to get you back under that 32% federal rate, and to keep you eligible for some of the other benefits we’ll discuss.
To put it another way: on your first $400,000 of income, your blended rate as you move up through the brackets works out to about 20%. Any dollar you earn over $400,000 is taxed at 32%. So compare your blended rate on that first $400,000 to the next $100,000: what you owe the federal government jumps by more than 50%, closer to 60%. If you’re in California, you’ll also see a gradual increase in state taxes on top of that. Some other states have marginal tax rates, though most have flat rates. And if you’re smart, like Dave, you just live in Florida.
Another place you’ll see this $400,000 threshold is the qualified business income deduction, which matters a lot if you’re a full-time business owner. It’s a 20% deduction you can access, though it’s a complex deduction and I’m oversimplifying it here. It phases out based on your taxable income before the deduction is applied, and, of course, that phaseout starts at $400,000. If your income comes in right at $400,000, the 20% deduction is worth $80,000. It gradually phases out completely once you hit $553,000 for married filing jointly, half that for single filers. So not only do you jump into the 32% bracket, you also start losing that 20% deduction.
Then there’s the child tax credit: $2,200 per child, which also starts phasing out at $400,000. You might be wondering how to get your income down closer to that number. If you’re interested in the child tax credit, it phases out fairly quickly, over about $44,000 of income, depending on how many kids you have. (If there are any Mormons in the audience, this one will be especially useful to know.) I’ll share these slides if you want to review the details, but this can be a really nice credit if you can get your adjusted gross income, meaning how much your earnings are reported as, into that range and you have children. Remember, a credit is money the IRS actually gives back to you.
Here’s another sweet spot worth knowing about, a temporary change made under the recent One Big Beautiful Bill Act. Normally you can deduct $10,000 of state and local taxes against your federal taxes, including state income tax and state property taxes. But if your income is under $500,000, you can access an additional $30,000 deduction. That one phases out fast: as your income moves from $500,000 to $600,000, it disappears entirely. So you lose that $30,000 deduction over just $100,000 of income, which means that as your income rises from $500,000 to $600,000, you’re effectively being taxed on not $100,000 of additional income, but $130,000.
Imagine this: you earn $605,000, and you’re able to create a $100,000 write-off, maybe through retirement accounts, prepaying expenses, oil and gas, or whatever business deduction or AGI reduction you can put together. That $100,000 write-off effectively becomes a $130,000 deduction once you factor in the additional state and local tax benefit you regain. Being aware of where you stand in these brackets and sweet spots, and what applies to your situation, is genuinely valuable for deciding which strategies are worth pursuing given their tax impact. And on top of that, as you pick up that $130,000 deduction, it also helps phase that 20% QBI deduction back in.
For years, I thought building wealth meant finding the next great investment. But as my portfolio grew, so did the complexity. I had real estate, private investments, insurance, tax strategies, and multiple advisors, yet no one was looking at the whole picture. I was still the one trying to connect all the dots, wondering if my wealth was actually working as efficiently as it could be. That experience taught me something most successful investors discover too late: building wealth isn’t just about owning more assets, it’s about making sure every part of your financial life works together. That’s why I created a complimentary masterclass called the Wealth Friction Tax. It reveals how disconnected investments, tax strategies, advisors, and financial decisions can quietly erode your wealth, and introduces a more coordinated way to manage it all. If you’ve built significant wealth but still feel like you’re the one holding all the pieces together, watch the complimentary masterclass at contrarianwealthbuilder.com.
So imagine this: you start off with $600,000 of income, and you get an oil and gas deduction, say Dave finds you a great fund, you put in $120,000 and get a $100,000 deduction (somewhat realistic numbers). That opens up a salt (state and local tax) deduction of $30,000 you normally wouldn’t have qualified for because you made too much, so it’s actually worth $130,000. Then let’s say that also phases in an additional qualified business income deduction, worth an extra $44,000.
So the cumulative effect: you spend $120,000, whether that’s an oil and gas investment, a cost segregation study, a retirement account strategy, or prepaying bills and vendors, and it brings your income all the way from $600,000 down to $426,000. That’s a $174,000 reduction in taxable income, not counting the reduction in state taxable income from that same write-off. If we value that bracket at a blended rate of around 30%, probably more if you’re earning at that level, that works out to about $52,000 in federal tax savings, not counting the state tax savings on top of it.
Again, just being aware of the tax implications based on where you stand in the tax code, and what other deductions, credits, and incentives you might qualify for, can be incredibly helpful.
Thanks for tuning in to our special solo series. If this episode sparked something for you and you’re ready to learn more, head over to holisticwealthstrategy.com and download a free copy of my book. You’ll also get access to our investor community, where we share exclusive educational content, new opportunities, and resources designed to help you accelerate your path to freedom. And if you want to take it even further, book a call with our team to learn about our virtual family office services, or join our mastermind group, where we go deep into building true generational wealth. I’ll see you on the next episode.