High-income earners are my favorite clients. You overpay tax, and that’s exactly the problem I solve best.
If you’re a sole proprietor, you need to get incorporated. If you’re a W-2 employee, you need an operating company. Those are not optional extras. They’re the starting point for keeping what you earn instead of handing more of it to the IRS every April.
Today I want to walk you through three things. First, why your entity structure is your number one tax strategy. Second, a C corporation lets you defer taxes with an off-year filing. Third, how your IRA, your self-directed IRA, your Roth IRA, and your Roth 401(k) fit into the plan.
What Tax Deferral Actually Means
I call the internet the bathroom wall, because anybody can write anything on it. A lot of what circulates there treats tax preparation, meaning filing a return, as if it’s the whole strategy. It isn’t.
Tax deferral is not tax avoidance. Tax deferral means you earn the money now and pay the tax later, ideally never, the way the wealthy do it. We do it through entities. We do it through real assets: real estate, gas, oil, and alternatives. We own the asset, not the stock. And we work with tax strategists who actually know the code.
“Tax deferral means you’re going to earn the money now and pay the tax later, ideally never, the way the wealthy do it.”
There are between 81,000 and 83,000 pages of tax code in the United States. That number alone should tell you something: nobody files their way to wealth by memory. You need a strategist who works inside that code every day, not a preparer who shows up once a year.
Why Entity Structure Is Your Number One Strategy
There are two ways to make money and get taxed. You make money as a high-income earner with a W-2 paycheck, get taxed immediately, and receive what’s left. Or you have a company that makes the money, activates the deductions, and gets taxed on what’s left.
It’s obvious which one you want. Companies get the best tax strategies. Individuals get the worst.
If you have a huge, necessary job, a government job, a teaching job, a firefighter job, or a police job, you still need the offset. The company needs a legal intent to make money, and it needs to be an operating company. That’s a bigger question than walking into the Secretary of State’s office and grabbing an LLC, which is exactly what the bathroom wall tells people to do. I’ve had clients come to me after doing that, only to learn they picked the wrong entity for their household, their filing status, and their income.
The difference between a C corporation, an LLC, an S corporation, and a limited liability partnership matters. An LLC, an S corp, and a limited partnership all close their books on December 31, just like you. Everything you did from January through December is reflected on your personal return. That’s where high-income earners get stuck: too much money pushing through one filing date with nowhere to go.
Why a C Corporation Changes Your Tax Year
A C corporation can file off-year: March, June, September, whenever fits your strategy. That off-year filing creates room for a legal, documented management relationship between companies.
Here’s how it plays out. Say you run several LLCs doing commercial rehabs: a mobile home park, an RV park, and a storage unit business. Depending on your state, that’s three or four separate LLCs, and states like California, New York, Pennsylvania, and New Jersey add extra complexity.
A C corporation can act as the management company for all of them. It buys the supplies. It holds the lines of credit. It functions like the funding source in the relationship, contractually documented with resolutions, not a handshake. That structure gives the C corporation money, credit, and funding capacity, and it helps fund the other entities as projects move forward. They pay each other back legally as the work progresses.
If you end up with a big tax burden at year’s end, you have two levers: the retirement strategy I’ll cover next, or a legal relationship with a C corporation set up before December 31. Once the calendar turns, if you don’t already have that C corporation in place, the off-year strategy is gone for the year. Set it up before you need it, not after.
Where Your IRA and Roth Fit In
One of the biggest moves you’ll make each year is deciding whether to fund your IRA, and self-directing it changes what it can do for you. In a lower-income year, that’s often the moment to fund toward a Roth.
You should always fund the Roth when you can, which means staying under the current income threshold of $150,000 to qualify. If you’re earning past that on paper, you may be paying yourself more than you need to. I only pay myself $42,000 a year. My companies make the money and cover the deductions: the phone bill, the car bill, the expenses that would otherwise come out of my personal, after-tax dollars. I don’t need a bigger paycheck because my entities are already doing the work.
Depreciation: The Strategy Most High Earners Skip
Depreciation deserves its own conversation. With the current bonus depreciation rules, R&D credits, and cost segregation strategies available, high-income earners who never activate the code are leaving real money on the table.
The top depreciation assets right now are gas and oil, including water reclamation, and aviation. Real estate is right behind them because of bonus depreciation. After that: RV parks, storage facilities, and heavy equipment rentals, all of which carry strong depreciation schedules. Water rights and mineral rights, cross-segmented through a C corporation, round out the list.
Start Today
You don’t need to overhaul everything by Friday. You need to start the sequence.
- Get a real entity assessment. Don’t default to “quickly get an LLC.” Have a strategist review your household, filing status, and income before you make any decisions.
- Decide if a C corporation belongs in your structure. If you’re running multiple LLCs or facing a large year-end tax bill, the off-year filing strategy needs to be in place before December 31, not after.
- Check your eligibility for a Roth this year. If you’re under the income threshold, fund it. If you’re not, ask whether you’re paying yourself a salary that’s higher than your strategy actually needs.
- Look at the depreciation of assets. Real estate, gas and oil, RV parks, and storage facilities all carry meaningful depreciation schedules worth evaluating against your income.
Overpaying $10,000 a year in taxes for 20 years puts $1.1 million in the IRS’s pocket. That could be on your balance sheet instead. You get to decide whether that’s important enough to stop spending the way you’ve been spending and put a real strategy in its place.
Go to AskLoral.com Ask a question, make a request.
