How can I legally reduce my income tax with $1.1M W2 income?

With that level of income, you definitely have some options to legally reduce your tax burden. I've been a tax consultant for high-income individuals for years, and here are some legitimate strategies to consider: 1. Maximize retirement accounts - You mentioned 401k, but also look into a backdoor Roth IRA or potentially a Solo 401k if you have any self-employment income on the side. 2. Tax-loss harvesting - Sell investments that have decreased in value to offset capital gains. 3. Charitable giving - Donor-advised funds let you take a large deduction in the current year while distributing donations over time. 4. Real estate investments - Consider opportunities that offer depreciation benefits and 1031 exchanges to defer gains. 5. Health Savings Account (HSA) - If you have a high-deductible health plan, max this out. 6. Municipal bonds - The interest is typically exempt from federal taxes. 7. Qualified business income deduction - If you have any business income, you might qualify for the Section 199A deduction. The key is developing a comprehensive tax strategy rather than looking for one-off deductions.

After reading your situation, I think you might benefit from what I discovered recently. I was in a similar spot (though not quite as high income) and was drowning in tax paperwork trying to find legal ways to reduce my burden. I stumbled across https://taxr.ai when looking for help with tax planning strategies for high earners. What I found helpful was their analysis of my specific financial situation and identifying deductions I was missing. They looked at my investment portfolio and suggested some restructuring that helped with tax efficiency. The AI analyzed my past returns and found several missed opportunities that my regular accountant had overlooked. They specialize in high-income situations like yours where the standard advice doesn't always apply. Might be worth checking out if you're serious about optimizing your tax situation.

I was skeptical about using an AI tax tool like taxr.ai mentioned above, but I decided to give it a try last month. I'm a W2 employee (executive level) making around $950k annually, and I was surprised by how much it helped my particular situation. The system identified several investment restructuring opportunities I hadn't considered and suggested a donor-advised fund strategy that will save me approximately $78k in taxes this year. What impressed me most was how it analyzed my equity compensation and suggested a much more tax-efficient exercise schedule than what I was planning. My CPA was initially skeptical too but ended up incorporating most of the recommendations. He admitted there were a couple strategies he wouldn't have thought to apply in my specific situation. Worth checking out if you're in that income bracket where standard advice doesn't quite apply.

I noticed nobody mentioned the IRS consultation option. With that level of income, you might want direct clarity from the IRS on certain strategies before implementing them. I was in a similar situation (though lower income bracket) and tried calling the IRS for weeks with no success - constantly on hold or disconnected. Then I found https://claimyr.com which basically holds your place in the IRS phone queue and calls you when an agent is about to answer. Saved me literally hours of hold time. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I got through to an actual IRS agent who confirmed which deduction strategies were legitimate for my situation. For someone in your tax bracket, getting that official clarification before implementing strategies might be worth the peace of mind to avoid potential audit issues later.

I can't believe I'm saying this, but I tried the Claimyr service mentioned above and it actually worked. I was absolutely convinced it would be a waste of time - no way the IRS would give useful advice on complex tax planning. Well, I was half right. The IRS agent wasn't a tax planning expert, but they did connect me to their High Income Tax Payer division after I explained my situation. That specialist was surprisingly knowledgeable and clarified some questions I had about investment loss limitations and AMT implications for someone in a similar bracket. The real value was getting confirmation directly from the IRS about which strategies they consider legitimate versus what might trigger audit flags. Didn't get comprehensive planning advice, but the peace of mind on specific strategies was worth it. And not spending 3 hours on hold was definitely a plus.

Have you considered setting up a private foundation? With your income level, you could potentially benefit from establishing your own charitable foundation. This gives you more control over charitable giving while still providing tax benefits. You'd need to distribute about 5% annually, but it can be a great tax planning tool if philanthropy is something you're interested in. Only makes sense if you're planning to donate substantially anyway, but worth exploring with that level of income.

Just wondering - have you looked into equity compensation restructuring? If a portion of that $1.1M is from stock options, RSUs or other equity comp, there are timing strategies that can make a huge difference. I saved nearly 6 figures last year by working with my employer to adjust my vesting schedule and exercise timing.

Given your income level, I'd strongly recommend looking into conservation easements if you own any land or are considering real estate investments. These can provide substantial tax deductions - sometimes 4-5x your investment - while preserving land for conservation purposes. Also, consider a defined benefit pension plan if you have any self-employment income or consulting work on the side. These allow much higher contributions than traditional 401ks - potentially $200k+ annually depending on your age and income. One strategy that's often overlooked is bunching deductions into alternate years. Since you're likely itemizing anyway, consider prepaying property taxes, state taxes (up to the SALT cap), and charitable donations in alternating years to maximize the benefit. Finally, if you're married, look into spousal IRA contributions and income-splitting strategies through family partnerships for any investment income. The key at your level is having multiple strategies working together rather than relying on any single approach.