Tax Deferral Strategies Every High-Earner Should Know

When you’re earning well into the six or seven figures, taxes can feel like a slow leak on your wealth. You make the money, but you don’t always get to keep it—not right away, at least. That’s where tax deferral strategies come in. They don’t eliminate taxes, but they shift the timing. Done right, they give you more control over when (and how much) you pay.

Let’s break it down. Plainly. With a bit of real talk.

What is Tax Deferral and How Does it Work?

Tax deferral is the practice of delaying your tax liability to a future date.

You still owe the tax. You’re just choosing to pay it later—ideally when your tax rate is lower or when the money can grow in a tax-advantaged way in the meantime.

Some methods are familiar. Others are more technical. But they all revolve around one idea: controlling the timing.

Why Should High-Earners Consider Deferring Taxes?

Simple: you’re in a high bracket.

• Deferring income now might mean paying taxes in a lower bracket later (like in retirement).
• Deferral frees up more cash today. That cash can be invested, used for business expansion, or even saved for future tax bills.
• It gives your money more room to grow before the IRS takes a cut.

How Does Deferring Taxes Impact Long-Term Wealth Building?

Let’s say you defer $100,000 in income and invest it.

If you earn 6% annual return over 10 years, that’s roughly $179,000 instead of $70,000 after-tax if you paid 30% upfront.

The compounding effect is real.

And if you’re thinking of retiring in a lower bracket—or moving to a no-income-tax state—this becomes a lot more attractive.

What Are the Most Common Tax Deferral Strategies for High-Income Earners?

Here’s what people in your position often use:

• 401(k) contributions
• Cash balance pension plans
• Deferred compensation plans
• Real estate like 1031 exchanges
• Installment sales
• Captive insurance structures
• Charitable remainder trusts

Each has pros and tradeoffs. Let’s look closer.

How Do 401(k)s and Other Retirement Plans Help Defer Taxes?

It’s basic, but it works.

401(k)s let you defer salary into a retirement account. You don’t pay income tax now. You pay it when you withdraw later.

If you’re maxing it out, consider a cash balance plan—especially if you’re self-employed or a partner in a firm.

Can a Cash Balance Plan Help Reduce Current Tax Liability?

Yes.

These plans are especially useful for high-income professionals over 40. They allow six-figure contributions annually, often in addition to a 401(k).

That’s serious deferral power.

How Do Deferred Compensation Plans Work?

This is common in executive-level compensation packages.

You choose to defer part of your salary, bonuses, or equity.

It stays with the employer (unsecured, so there’s risk), but you don’t pay tax until it’s paid out—often after retirement or upon separation.

What Are Installment Sales and How Do They Help With Tax Deferral?

Installment sales allow you to spread the recognition of gain over several years.

Instead of taking a huge capital gain in one year, you break it up. It’s useful when selling real estate or a business.

See how it relates to minimizing taxes when selling a medical practice?

How Can 1031 Exchanges Defer Taxes on Real Estate Gains?

If you sell investment property and roll the gain into another similar property, you don’t pay capital gains right away.

It keeps your real estate portfolio growing tax-deferred.

It pairs well with strategies in self-insurance and risk transfer, especially when tied to real estate syndicates or funds.

Are Cost Segregation Studies a Form of Tax Deferral?

Yes.

These studies allow property owners to accelerate depreciation. That increases deductions now and defers tax.

More short-term cash. More flexibility.

What is a Captive Insurance Company and How Does it Defer Taxes?

A captive insurance company is a legitimate business structure that allows you to self-insure specific risks.

Premiums paid to the captive are often tax-deductible. The captive retains the money and earns investment income.

Taxes are deferred until profits are distributed—if structured properly.

How Can Private Placement Life Insurance (PPLI) Play a Role in Deferral?

PPLI shelters investment growth from taxes.

As long as funds stay within the policy, they grow tax-deferred.

Withdrawals can be structured as loans, allowing access to funds without triggering income tax.

What Role Do Charitable Remainder Trusts (CRTs) Play in Deferring Taxes?

A CRT lets you donate appreciated assets while keeping an income stream.

You get a partial deduction now, defer the capital gain, and reduce estate taxes. It also supports causes you care about.

What Tax Deferral Options Are Available for Physicians and Healthcare Professionals?

Plenty. You can:

• Use 1099 income to fund solo 401(k)s and SEP IRAs (see this guide)
• Set up a cash balance plan through a group practice
• Use an S corporation to split income and defer part of it into retirement accounts

How Can Business Owners Defer Income Taxes Through Entity Structure?

Entity choice matters.

Electing S corp status, for instance, can allow for better income allocation, reduced self-employment taxes, and room for retirement deferrals.

Some owners even explore multiple income streams to better control when and how income is taxed.

Are There Risks to Deferring Taxes?

Yes, and they’re often overlooked:

• The future tax rate might be higher
• You could lose flexibility in how you access cash
• Legislative changes could limit certain strategies

That’s why working with a skilled tax advisor is critical

Can Tax Deferral Backfire Later in Retirement?

It can.

If you’ve built up a large balance in tax-deferred accounts, required minimum distributions could push you into a higher bracket later.

Tax planning is what helps avoid that.

What Happens if Tax Rates Rise in the Future?

That’s the gamble.

You defer expecting lower rates—but that’s not guaranteed. Planning multiple scenarios helps. Roth conversions, tax-free accounts, and spreading out income help balance the risk.

How Do Required Minimum Distributions (RMDs) Affect Deferred Accounts?

Once you hit a certain age (currently 73), you’re forced to start withdrawing from most deferred accounts.

If you’ve deferred too much, the forced income can mess up Medicare premiums, tax brackets, and even Social Security taxation.

When is the Best Time to Use a Tax Deferral Strategy?

When your current tax rate is meaningfully higher than your expected future rate.

It’s also smart when your business is booming, or you’ve had a strong investment year.

Should You Combine Tax Deferral with Other Strategies Like Tax-Free Growth?

Yes. Balance is key.

For example:

• Use tax-deferred 401(k)s and tax-free Roth IRAs
• Mix deferred comp with PPLI
• Consider when to realize losses (see how market losses create opportunity)

How Can a Tax Advisor Help You Implement a Deferral Strategy?

You can try to piece it together yourself—or you can work with someone who:

• Knows the best structures for doctors
• Helps build plans around timing, cash flow, and your goals
• Identifies red flags before they become IRS problems

Even better if they understand non-clinical income strategies.

FAQ

What’s the difference between tax deferral and tax avoidance?
Deferral is legal timing. Avoidance often involves aggressive loopholes or risky maneuvers. Big difference.

Can you defer taxes forever?
Not really. Eventually, most deferral strategies have endpoints (retirement, sale, death). The goal is to time them wisely.

Is tax deferral only for the ultra-wealthy?
No. Even mid-six-figure earners can benefit—especially with the right mix of retirement and business tools.

What are some overlooked tax deferral tools?
Captives, installment sales, and CRTs often go unnoticed. They’re more niche, but powerful when used correctly.

What’s the catch?
You trade liquidity and sometimes control. And the tax bill still comes—it’s just later. But that’s where smart planning helps.

Visit contact physiciantaxsolutions.com to schedule a consultation and learn how we can help you take control of your tax strategy today.

This post serves solely for informational purposes and should not be construed as legal, business, or tax advice. Individuals should seek guidance from their attorney, business advisor, or tax advisor regarding the matters discussed herein. physiciantaxsolutions.com assumes no responsibility for actions taken based on the information provided in this post.