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When it comes to building wealth, most people focus almost exclusively on investment returns. They chase the hottest stocks, debate index funds versus active management, and obsess over every market fluctuation. But here's what many high-income earners and business owners miss: the biggest controllable factor in your financial success isn't your investment strategy. It's tax efficiency.
And once you've optimized your taxes and built real wealth, there's another challenge many people face: actually learning how to spend and enjoy the money they've worked so hard to accumulate.
Let's break down why strategic tax efficiency can be transformative for your finances, and why developing a healthy relationship with spending is just as important as saving.
The Controllable Advantage: Why Tax Efficiency Matters More Than You Think
Investment markets are inherently unpredictable. You can build a solid portfolio, diversify appropriately, and follow sound principles, but you cannot control what the S&P 500 does next quarter or how geopolitical events will impact your holdings. Market returns are largely outside your sphere of influence.
Tax efficiency, on the other hand, operates within a framework of known rules and opportunities. The tax code is publicly available, and the strategies to help minimize your tax burden are established and accessible. This makes tax efficiency one of the most impactful areas where you can take meaningful action to improve your financial outcomes.
For high-income individuals and business owners especially, proactive tax strategy can generate substantial savings that compound over time. When you consider that some business owners can potentially reduce their annual tax liability through sound planning, the impact becomes clear (1).
Common Tax Efficient Strategies That Business Owners Often Overlook
Many successful business owners come to financial advisors having done little to no strategic tax efficiency. They've built profitable companies and generated significant income, but they've left substantial money on the table simply because they weren't aware of available opportunities or didn't prioritize implementation.
Here are some key areas to consider:
Retirement Account Strategies
Retirement accounts offer some of the most powerful tax advantages available. Depending on your business structure and income level, you might consider:
• Traditional 401(k) or Solo 401(k) contributions that reduce current taxable income
• Defined benefit plans for businesses with consistent high income and few employees
• SEP IRAs or SIMPLE IRAs depending on your business size and structure
• Backdoor Roth conversions for high earners who exceed income limits for direct Roth contributions
The contribution limits for retirement accounts can be substantial. For 2026, 401(k) employee deferrals can reach $24,500, with an additional $8,000 catch-up contribution for those 50 and older. Total contributions including employer contributions can reach $72,000 (or $80,000 with catch-up contributions) (2).
Qualified Business Income Deduction (QBID)
The QBID, established under the Tax Cuts and Jobs Act, allows eligible self-employed individuals and small business owners to deduct up to 20% of their qualified business income (3). However, this deduction comes with income thresholds and limitations that vary based on your business type and total taxable income.
Strategic planning around the QBID can involve:
• Income timing to maximize the deduction in high-income years
• Evaluating whether W-2 wages or property holdings limit your deduction
• Considering business structure changes to optimize eligibility
Entity Selection and Structure
The legal structure of your business has significant tax implications. Sole proprietorships, partnerships, S corporations, and C corporations all face different tax treatments. For many business owners, converting to an S corporation structure can provide opportunities to reduce self-employment taxes through reasonable salary and distribution planning.
However, entity selection isn't one-size-fits-all. A suitable structure depends on your specific situation, including your income level, business type, growth plans, and long-term goals.
Pass-Through Entity Tax (PTET) Elections
Many states have implemented PTET elections in response to the cap on state and local tax (SALT) deductions. These elections allow pass-through entities to pay state income taxes at the entity level, which can then be deducted as a business expense on federal returns, effectively circumventing the SALT cap limitation (4).
If you operate in a state with PTET options and haven't explored this opportunity, you may be missing significant tax savings.
The Reality Check: You Need Either Education or Professional Help
Here's the straightforward truth: to benefit from tax efficient opportunities, you need to either invest significant time in educating yourself about tax strategy or work with a professional who can guide you through the process and help ensure implementation happens consistently.
The tax code is complex and changes regularly. Staying current with new legislation, understanding how different strategies interact, and actually executing plans year after year requires dedicated effort. Many successful professionals and business owners simply don't have the time or inclination to become tax efficiency experts on top of running their businesses and living their lives.
Consider whether you're genuinely committed to:
• Staying educated on tax law changes and planning opportunities
• Implementing strategies consistently each year
• Coordinating between your CPA, financial advisor, and legal counsel when needed
• Reviewing and adjusting your approach as your income and circumstances change
If the honest answer is no, working with a qualified financial advisor or tax professional who focuses on proactive planning may provide far more value than the cost of their services.
Money as a Tool: Reframing Your Relationship with Wealth
Once you've built wealth through sound tax strategy, strong income, and consistent saving, another challenge often emerges: actually using that money to improve your life.
Many high-net-worth individuals struggle with spending, even when they can clearly afford it. This often stems from upbringings where frugality was emphasized, or from the mindset that drove their financial success in the first place. The discipline that helped you build wealth can sometimes become a barrier to enjoying it.
The Goalpost Problem
People who focus exclusively on accumulating money often experience a phenomenon where the finish line keeps moving. They tell themselves they'll feel secure at $1 million, then $2 million, then $5 million. But that sense of "enough" never quite arrives. The goalposts keep shifting, and satisfaction remains perpetually out of reach.
The most content and successful people tend to be those engaged in work and activities they genuinely find interesting or meaningful. The money becomes a beneficial byproduct rather than the sole objective. This mindset shift can be surprisingly difficult but is often essential for long-term satisfaction.
The Spending Switch Myth
Many people believe that once they reach retirement or a certain age, they'll simply flip a switch and start spending more freely. The reality rarely works this way.
Research actually shows that spending typically decreases in retirement, not increases (5). People who spent decades training themselves to save and defer gratification don't suddenly become comfortable spenders overnight. In many cases, retirees spend less than they could afford because concerns about running out of money create anxiety, even when financial projections show substantial cushion.
If you want to actually enjoy the wealth you've built, you need to start practicing and developing comfort with strategic spending now, not at some arbitrary future date.
Practical Strategies for Learning to Spend Intentionally
Create a Spending Framework
One approach is to clearly separate your money into categories with specific purposes:
1. Calculate and consider automating a suitable amount for saving and investing based on your goals
2. Allocate the remainder to spending categories that align with what brings you joy and meaning
3. Set up dedicated accounts for specific spending goals like travel, experiences, car purchases, or home improvements
When you can see that your savings goals are met and that specific funds are earmarked for enjoyment, it becomes psychologically easier to actually spend that money without guilt.
Permission-Based Spending
Some people benefit from explicit permission structures. Work with your financial advisor to establish clear guidelines: "Based on your plan, you can comfortably spend $X annually on discretionary items without impacting your long-term goals." Having this external validation can help overcome internal resistance to spending.
Address the Opposite Problem: Overspending
Of course, some people face the inverse challenge. No matter how much income increases, spending rises to match or exceed it. If you consistently spend every dollar you earn regardless of income level, building financial security becomes nearly impossible.
For chronic overspenders, systems and automation become essential:
• Consider automating savings and investments so they happen before you see the money
• Create friction in your spending process by removing saved payment information or using cash for discretionary purchases
• Establish accountability through regular financial reviews with a partner or advisor
• Consider whether underlying emotional or psychological factors drive spending behaviors
Your Relationship with Money Determines Your Financial Success
At the end of the day, technical knowledge about tax strategies and investment vehicles matters less than your fundamental relationship with money. Understanding that money is a tool rather than an end goal creates space for both building wealth effectively and using it to support a meaningful life.
The goal isn't to die with the largest possible bank balance. It's to have the resources to live according to your values, support the people and causes you care about, and experience the things that matter to you.
This requires both the discipline to build wealth through strategies like tax efficiency and the wisdom to actually deploy that wealth in service of your life rather than simply accumulating for accumulation's sake.
Taking Action: Where to Start
If you're a high-income earner or business owner who hasn't focused on tax strategies, consider this your starting point:
1. Schedule a comprehensive review of your current tax situation with a qualified professional
2. Evaluate whether you're taking advantage of available retirement account strategies
3. Assess whether your business entity structure still serves your current situation
4. Explore state-specific opportunities like PTET elections if applicable
5. Create a system to help ensure tax efficiency happens proactively each year, not just reactively at tax time
And if you've successfully built wealth but struggle to spend it, take time to:
1. Clarify what actually brings meaning and joy to your life
2. Create a spending framework that separates committed savings from available spending
3. Practice strategic spending in low-stakes ways to build comfort
4. Consider working with an advisor who can provide perspective and permission to enjoy what you've built
Financial success requires making decisions in both directions: trying to optimize how you save and minimize taxes, while also learning how to deploy resources toward what matters. Master both, and you'll be well-positioned not just to build wealth, but to actually benefit from it.
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Sources
1. Internal Revenue Service. "Tax Benefits for Businesses." IRS.gov. Updated January 2024.
2. Internal Revenue Service. "401(k) limit increases to $24,500 for 2024, IRA limit rises to $7,500." IRS.gov. November 13, 2025.
3. Internal Revenue Service. "Qualified Business Income Deduction." IRS.gov. Updated March 2024.
4. Tax Foundation. "State Pass-Through Entity Taxes." Tax Foundation. Updated December 2023.
5. Employee Benefit Research Institute. "Spending in Retirement." EBRI Issue Brief. 2023.
Disclosures:
Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Investing involves risk which includes potential loss of principal. The use of asset allocation or diversification does not assure a profit or guarantee against a loss.
All numeric examples and any individuals shown are hypothetical and were used for explanatory purposes only. Actual results may vary.
These concepts were derived under current laws and regulations. Changes in the law or regulations may affect the information provided.
This information is not intended to be used – and cannot be used – to avoid penalties under the Internal Revenue Code.
Neither OneAmerica Securities, the companies of OneAmerica Financial, Fuller Financial, nor their representatives provide tax or legal advice. For answers to specific questions and before making any decisions, please consult a qualified attorney or tax advisor.
