Tax Strategy Guide
Tax Planning Checklist for Founders and Executives
Founders and executives face uniquely complex tax situations: equity compensation, liquidity events, multi-state obligations, and high marginal rates. This checklist organizes the 18 most impactful actions by timing so nothing falls through the cracks.
Before Year-End (October-December)
1. Maximize 401(k) deferrals: Confirm you will hit the $23,500 limit ($31,000 if 50+) by December 31. If you changed jobs mid-year, verify combined contributions do not exceed the limit across plans (IRC §402(g)). 2. Fund Mega Backdoor Roth: If your employer plan allows after-tax contributions and in-service withdrawals or conversions, contribute up to the §415(c) limit minus employee deferrals and employer match. Execute the Roth conversion before year-end. 3. Execute tax-loss harvesting: Review your portfolio for positions with unrealized losses. Sell to realize losses that offset capital gains dollar-for-dollar, plus $3,000 against ordinary income (IRC §1211(b)). Respect the 30-day wash sale rule (IRC §1091). 4. Complete charitable contributions: Donate appreciated stock to a DAF or public charity before December 31. The deduction for appreciated property is limited to 30% of AGI with a 5-year carryforward (IRC §170(b)(1)(C)). 5. Initiate a cost segregation study: If you purchased rental property this year, a cost seg study should be completed before year-end to claim accelerated depreciation on your current-year return. 6. Evaluate Roth conversion opportunity: If your income is unusually low this year (sabbatical, between jobs, pre-IPO), convert Traditional IRA assets to Roth while your marginal rate is depressed.
Quarterly Actions
7. Review estimated tax payments: High earners with variable income must pay quarterly estimated taxes (April 15, June 15, September 15, January 15). The safe harbor requires paying at least 110% of prior-year tax if AGI exceeded $150K (IRC §6654(d)(1)(C)). Use the annualized income installment method (Form 2210 Schedule AI) if income is concentrated in specific quarters. 8. Track RSU vesting and withholding: RSUs are taxed as ordinary income at vesting. Verify your employer is withholding at the correct supplemental rate (37% for amounts over $1M under IRC §3402(g)). If under-withheld, increase your estimated payment for that quarter. 9. Monitor ISO exercise windows: If you hold ISOs, review the current 409A valuation and model the AMT impact of exercising. Exercising in a quarter where you have capital losses or lower ordinary income reduces the AMT hit. 10. Update multi-state tax allocation: If you work across multiple states (common for remote executives), track days worked in each state. Many states use a day-count method to allocate income. California is particularly aggressive about sourcing income to residents and non-residents performing services in-state.
At a Liquidity Event (IPO, Acquisition, Secondary Sale)
11. Confirm QSBS eligibility: Review whether your shares qualify under IRC §1202: C-corp issuance, $50M gross asset test at issuance, 5-year holding period, active business requirement. Document this before the event. The company may not exist in its current form afterward. 12. Model ISO vs. RSU tax impact: If you hold both ISOs and RSUs, model the tax impact of different sale sequences. Selling RSU shares first may be preferable if ISO shares are approaching qualifying disposition status. 13. Make an immediate estimated tax payment: Liquidity events often create under-withholding. Calculate your estimated liability within 2 weeks and make a payment to avoid compounding underpayment penalties. Use EFTPS for same-day federal estimated payments. 14. Evaluate DAF contribution of appreciated shares: If you intend to give charitably, contribute shares before selling. This avoids capital gains tax and provides a fair market value deduction. Coordinate the stock transfer with your broker and the DAF provider, as transfers take 3-7 business days. 15. Assess 83(b) election status for any remaining grants: If you have unvested restricted stock (not RSUs), confirm whether an 83(b) election was filed within 30 days of grant (IRC §83(b)). An 83(b) election accelerates the taxable event to grant date at the then-current FMV, which is advantageous if the stock has appreciated significantly since grant.
See full post-IPO tax strategy →Ongoing / Annual Review
16. Evaluate real estate investment opportunities: A short-term rental property with cost segregation can generate $50K-$100K+ in first-year depreciation deductions. Combined with material participation (average stay under 7 days, 500+ hours), these losses offset active income. This is the single highest-impact ongoing tax strategy for high earners who are willing to invest in real estate. 17. Review entity structure: If you have consulting income, board fees, or advisory income, evaluate whether an S-corp election reduces self-employment tax. The S-corp pays you a 'reasonable salary' (subject to payroll taxes) and distributes remaining profits as dividends (not subject to SE tax). The threshold where S-corp savings exceed the administrative cost is generally $60K-$80K in net self-employment income. 18. Maintain documentation: Keep contemporaneous time logs for material participation in STR activities, mileage logs for business use, records of ISO exercises and cost basis, and all charitable contribution receipts. The IRS burden of proof falls on the taxpayer for deductions and credits (IRC §7491). Maintain records for at least 7 years from the filing date.
Calculate your STR tax savings →The Priority Matrix: Where to Start
Not all 18 items have equal impact. If you can only focus on five, prioritize in this order: (1) Estimated tax payment compliance, avoids penalties immediately. (2) 401(k) and Mega Backdoor Roth maximization, guaranteed tax-deferred or tax-free compounding. (3) Tax-loss harvesting, directly reduces your current-year tax bill. (4) Cost segregation study on rental property, the single largest deduction for most high earners. (5) QSBS documentation, potentially the largest tax benefit of your career if you qualify. Everything else is high-value but can be layered in over subsequent quarters.
What to Bring to Your CPA Meeting
Arrive at your annual tax planning meeting with: (1) Year-to-date pay stubs showing W-2 earnings and withholding. (2) Brokerage statements showing realized gains/losses, RSU vest records, and ISO exercise records. (3) K-1 schedules from any partnerships, S-corps, or trusts. (4) Rental property income and expense summary, including mortgage statements and property tax bills. (5) A list of any major events: job change, stock sale, property purchase, marriage, divorce, birth of a child. (6) Your estimated tax payment history for the current year. (7) Prior-year tax return (your CPA should have this, but bring it as backup). The more organized your materials, the more time your CPA can spend on strategy rather than data gathering.
Common Mistakes That Cost Founders $50K+
The most expensive mistakes are errors of omission: (1) Not filing an 83(b) election within 30 days. This cannot be corrected retroactively and can cost hundreds of thousands in additional tax. (2) Selling ISO shares before the qualifying disposition holding period. This converts the entire spread from long-term capital gains (20%) to ordinary income (37%). (3) Missing the QSBS documentation window. Once a company is acquired or goes public, obtaining the gross asset certification retroactively is difficult or impossible. (4) Failing to claim cost segregation on a rental property. The depreciation you do not claim still reduces your basis at sale, so you pay recapture tax on deductions you never took. (5) Not making estimated tax payments. The underpayment penalty compounds quarterly and is not deductible.
See which strategies apply to you
Calculate my savings →50+ strategies analyzed · CPA-verified · 2026 tax law including OBBBA
Frequently Asked Questions
When should a founder start tax planning?
Tax planning should begin at incorporation. Filing an 83(b) election on founder shares within 30 days of grant, ensuring the company qualifies for QSBS treatment, and choosing the right entity structure (C-corp for QSBS eligibility, S-corp for pass-through) are decisions that cannot be corrected later. For annual tax planning, begin in Q3 (July-September) so you have time to execute strategies before year-end deadlines.
How do I handle taxes if I work in multiple states?
Multi-state taxation is based on the income sourcing rules of each state. Most states use a day-count method: if you work 20 days in New York out of 250 total work days, NY taxes 8% of your income. California, New York, and Massachusetts are the most aggressive about non-resident taxation. Some states have reciprocity agreements. Track your work days by state using a calendar or app, and file non-resident returns in every state where you performed services. Your resident state generally provides a credit for taxes paid to other states to avoid double taxation.
Should I elect S-corp status for my consulting income?
An S-corp election makes sense when your net self-employment income exceeds approximately $60K-$80K annually. Below that, the administrative costs (payroll processing, additional tax returns, state fees) outweigh the self-employment tax savings. Above that threshold, the S-corp lets you pay yourself a 'reasonable salary' (subject to payroll taxes) and distribute remaining profits as dividends, which are not subject to the 15.3% self-employment tax. The savings are roughly 15.3% of the difference between your net income and your reasonable salary.
What records do I need to keep for material participation in my STR?
The IRS requires contemporaneous documentation of your hours spent on the STR activity. Maintain a daily or weekly log showing: date, hours spent, and a description of the activity (e.g., 'responded to guest messages, 1.5 hours,' 'coordinated cleaning turnover, 2 hours'). A spreadsheet, calendar entries, or a purpose-built app all work. The key is 'contemporaneous', meaning logs created at the time of the activity, not reconstructed at year-end. You need to demonstrate 500+ hours per year (or meet another material participation test under Reg. §1.469-5T).
Is the Section 199A QBI deduction available to founders?
The Section 199A deduction provides up to 20% of Qualified Business Income from pass-through entities (S-corps, partnerships, sole proprietorships). However, it has limitations: the deduction phases out for Specified Service Trades or Businesses (SSTBs), including consulting, financial services, and professional services, when taxable income exceeds $383,900 for married filing jointly in 2026. If your pass-through business is not an SSTB, the deduction is limited by the greater of 50% of W-2 wages paid or 25% of W-2 wages plus 2.5% of UBIA (unadjusted basis of depreciable assets). For most founders with high incomes, the SSTB limitation is the binding constraint.