As President Donald Trump has unveiled wide-ranging tariffs since taking office in January, the money saver's playbook has become clear: Move fast on big-ticket purchases before tariffs made them costlier, then slow down to see where tariff policies and consumer prices go next.
Now comes the tax-strategy equivalent for the ultrawealthy.
With Trump apparently mulling tax hikes on individuals earning more than $2.5 million and families earning more than $5 million, the prospect of higher income-tax rates for multimillionaires now seems slightly more possible than it did at the start of the tax-bill negotiations — though it's hardly a sure thing.
If it happens, it may soon be time for these high-end households to quickly boost their income in 2025 and then slow down to backload deductions that have more tax-busting power in 2026, experts say.
Accelerating income and backloading deductions "would be a good strategy if this [tax plan] were to occur," said Jesse Rodriguez, a director in accounting firm Kaufman Rossin's tax advisory group. "It does seem very analogous" to how many Americans have strategized their spending around tariffs, he added.
Republicans are trying to hash out the features of what Trump has called "one big, beautiful" tax and spending bill, which could cost trillions as it addresses Americans' taxes and other legislative to-dos.
Lawmakers are searching for revenue that would help defray the cost. Trump is reportedly considering whether the bill should add a top income-tax rate of 39.6% for individuals making at least $2.5 million and joint filers earning at least $5 million. The current top rate is 37%, applying at taxable incomes above $626,350 for individuals and $751,600 for married couples filing jointly.
Suppose an individual hypothetically earns $3.5 million in income per year. If the top rate were to increase, $1 million of those earnings — the amount above the $2.5 million limit — would be subject to the new 39.6% rate. That would increase their federal tax bill by an additional $26,000, Rodriguez said.
If an individual earns $12.5 million, then $10 million of those earnings would be taxed at the higher rate, leading to $260,000 in additional taxes. "It is a meaningful impact," said Rodriguez, noting that many of his ultrahigh-net-worth clients are motivated to adjust their strategy when it will save them at least $20,000 in taxes.
Several tax-planning experts said their clients are watching Capitol Hill closely but not sweating — yet. "We don't hear panicking," said Mark Baran, a managing director in the national tax office at CBIZ, a professional-services advisory. "I tell clients to just sit tight. Do not plan around what happens in the next few weeks, because it's going to change."
Brian Schmehil, a financial planner and managing director of wealth management at the Mather Group, told MarketWatch it is not in a person's best interest to be too reactive until there is more clarity about the new tax rate. He noted, for instance, that some people made complex and expensive estate-planning strategies leading up to 2026, expecting the $13.99 million estate-tax exemption would be halved under a Kamala Harris presidency. Now that this risk has dropped off with Republicans in control of the federal government, "most of those strategies ended up not making sense," he said.
Yet if the extra 39.6% tax bracket seems likely to become law,
Baran said, his firm has a plan. "We'll be looking more
aggressively at opportunities to mitigate their tax exposure,"
he said.
So will other tax and wealth planners. Rodriguez's clients are
in wait-and-see mode now, keeping a "level head," he
said. But decisions from the White House and Capitol Hill could
prompt Rodriguez and his clients to make decisions in their own
interest. "I think we're starting to feel the
pressure."
If tax rates do indeed go up for multimillionaires, here are some of the money moves they can make to mitigate the damage to their tax bills.
Take advantage of today's lower rates for 2025 income
Exercising nonqualified stock options (NSOs), which result in ordinary income tax, and speeding up bonuses to fully pay out in 2025 would be one way high-end taxpayers could bypass extra taxes in the future. Wrapping up business deals and compensation at closing would be another, said Baran. Many businesses are so-called pass-through entities where the income flows through to their owners. GOP critics say higher tax rates eat up money that owners could use to pour back into their businesses.
Some business deals may slice the payouts over several years to avoid a one-year windfall that results in a tax spike, Rodriguez said.
Those who were previously planning to defer income might now consider reducing or eliminating deferrals so income is taxed at today's lower rates, Schmehil said.
Still, Schmehil cautioned people weighing any moves to consider how accelerating income has its downsides. "A dollar paid in tax today costs more than a dollar paid tomorrow," he said. It's money that could go toward investments that might pay bigger returns later — "so unless there's a meaningful gap etween current and future tax rates, it may not be worth triggering substantial income just to get ahead of a small rate increase."
Slow down to focus on deductions in 2026 and beyond
Once a new, higher tax rate is in effect, high earners can uncork their tax-saving strategies.
Homeowners get a deduction for the state income taxes and local property taxes they pay. Donors get a deduction for the money, assets or stocks donated to charity. These write-offs could become especially valuable for rich taxpayers in 2026, said Christopher Weeg, partner at estate-planning law firm Comiter Singer.
The state and local tax deduction is currently capped at $10,000, and its future level is a matter of fierce debate. Members of the House of Representatives' SALT caucus are pressing for it to be higher as a "property-tax revolt" continues to unfold across the country.
Supposing the deduction maximum moves higher, homeowners may try to arrange paying both their 2025 and 2026 property taxes in 2026, Weeg said. That takes greater advantage of the higher deduction when a high-end household needs it more to cut their taxable income, he noted.
Bunching more charitable contributions in 2026 could be another way to cut the bill, Weeg said. Those who would be impacted by the new tax rate and are at least 70-and-a-half years old may also consider making qualified charitable distributions (QCDs), which are paid directly to an organization from a taxable IRA, in their higher-income years.
Even though the QCDs can't prompt a charitable deduction, the sum satisfies a mandatory distribution on an IRA and it isn't included on the donor's income.
"Even charitable giving has a timing strategy — your generosity can go further in high-tax years," Schmehil said.
Financial planner Spencer Betts said workers can set up deferred compensation plans for 2026, which allow "you to defer some income until you retire, assuming at that point your income would be less than your income while working."
Deferring income could be "the most obvious answer" to shrinking a tax bill as much as possible, said Tipiwa Walker, principal advisor at Lucre Advisory. But that "could lead to a deluge of taxes down the road," she added.
Planning ahead is the key to striking the right balance, and completely deferring income just "kicks the can down the road," said Baran.
The real deadline for the 'big, beautiful' bill
When will rich taxpayers know if there's a tax hike in store for them?
One idea is to get the bill through the House of Representatives by Memorial Day, House Speaker Mike Johnson said this week — a hopeful timeline cited by other key republicans.
But the debt ceiling, which the U.S. is expected to hit in a few months, is the true deadline to force passage, said Jonathan Traub, a managing principal at Deloitte Tax. The megabill will include a debt-ceiling lift so the government doesn't exceed its credit line to pay its bills and obligations.
The debt ceiling is "not just a deadline" — its inclusion in the bill is also a "hammer" to force enough "yes" votes, said Traub. A coming "x date," when the government can no longer pay its obligations, is "the real binding limit on how much they push this out," he noted.
There's a "reasonable probability" the government's cash and efforts to pay all its bills will be exhausted by August, Treasury Secretary Scott Bessent said in a Friday letter to congressional leaders. He urged lawmakers to increase the debt limit by mid-July, before a scheduled Capitol Hill recess.
It's not clear if congressional Republicans will go along with a 39.6% rate for wealthy taxpayers, said Traub, "but the harder the president pushes for it, the more likely it is to be included."
Originally published by MarketWatch
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