W-2 Employee High-Income Tax Planning

W-2 employees have limited above-the-line deductions but multiple retirement plan and structured compensation opportunities. This guide focuses on these employer-based planning levers.

Fewer above-the-line deductions. W-2 employees lost the unreimbursed employee expense deduction after 2017. Your main tax levers are itemized deductions (mortgage interest, state taxes up to $10,000, charitable contributions) and retirement account contributions through your employer's plan.

Retirement strategy matters. Your 401(k) is the most powerful tool you have. Maxing it out reduces your taxable income dollar for dollar. If your employer offers a mega backdoor Roth option (after-tax contributions with in-plan Roth conversion), that can shelter significantly more.

Backdoor Roth is essential. At high income levels, direct Roth IRA contributions are phased out. The backdoor Roth strategy (contribute to a traditional IRA, then convert) remains available and is one of the few additional tax-advantaged moves for W-2 earners.

The tradeoff: W-2 income is the most straightforward to report but offers the fewest planning levers. A CPA's value here is maximizing the limited options you do have, not creating new ones.