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How W-2 Earners Over $100K Can Lower Their Taxes (2026)
Short answer: All State Tax Resolution, led by Sabih Shafi, an IRS Enrolled Agent, helps W-2 employees plan their taxes and file their returns. On a salary over $100,000, your biggest levers are pre-tax accounts at work, the timing of your stock sales, and a few deductions, and most of them only work if you act before the year ends.
Key takeaways
Pre-tax 401(k) deferrals, up to $24,500 for 2026, come straight off your taxable wages.
HSA money put in through payroll, up to $4,400 for self-only coverage in 2026, skips federal income tax withholding, Social Security tax and Medicare tax.
Harvested losses offset your gains, plus up to $3,000 of other income a year. The wash-sale rule can take that loss away.
Direct Roth IRA contributions phase out for single filers between $153,000 and $168,000 for 2026, so many high earners use a backdoor Roth.
On an H-1B, once you pass the substantial presence test you are generally taxed on worldwide income and may have to report foreign accounts.
Facts on this page were checked against IRS.gov on October 6, 2026.
Why a W-2 salary over $100,000 is hard to cut
Your employer withholds tax from every paycheck, and you cannot deduct everyday work costs against W-2 wages the way a business owner deducts business expenses. For 2026, a single filer's taxable income over $105,700 is taxed at 24%, and income over $201,775 at 32%. What you can still control is how much of your pay is taxable, when you sell investments, and which deductions you claim.
Pre-tax accounts at work
401(k), 403(b) and 457 plans
For 2026 you can defer up to $24,500 of your pay into a 401(k), 403(b), governmental 457 plan or the Thrift Savings Plan. If you are 50 or older you can add an $8,000 catch-up, and at ages 60, 61, 62 and 63 the catch-up is $11,250. If your wages from that employer were over $150,000 in 2025, your 2026 catch-up contributions must go in as Roth.
Your employer's match does not count toward your $24,500. The total that can go into your account from you and your employer is capped at $72,000 for 2026. Some plans also take after-tax contributions that you can convert to Roth inside the plan, often called a "mega backdoor Roth." Ask your plan administrator whether yours allows it. A Roth 401(k) has no income limit to participate.
Health savings account (HSA)
You need a high-deductible health plan. For 2026 that means a deductible of at least $1,700 for self-only coverage or $3,400 for family coverage. The 2026 contribution limits are $4,400 for self-only coverage and $8,750 for family coverage, plus $1,000 more if you are 55 or older. Money your employer puts in for you, including through a cafeteria plan, is exempt from federal income tax withholding, Social Security tax and Medicare tax up to those limits. It then grows and comes out tax-free for qualified medical costs.
Health and dependent care FSAs
A health FSA lets you set aside up to $3,400 for 2026. If your plan allows a carryover, the most you can roll into the next year is $680. Be careful: coverage by a general-purpose health FSA generally stops you from contributing to an HSA. For 2026 the dependent care FSA limit rose from $5,000 to $7,500 ($3,750 if married filing separately).
IRAs and the backdoor Roth
For 2026 you can contribute up to $7,500 to IRAs, plus $1,100 if you are 50 or older. If you are covered by a retirement plan at work, the deduction for a traditional IRA phases out between $81,000 and $91,000 of modified AGI for single filers, and between $129,000 and $149,000 for a joint filer who is covered. Many W-2 earners over $100,000 are past those ranges.
Direct Roth IRA contributions phase out between $153,000 and $168,000 for single filers and between $242,000 and $252,000 for joint filers. Above those limits, many people use a backdoor Roth: a nondeductible contribution to a traditional IRA, then a conversion to a Roth IRA, both reported on Form 8606. If you already hold pre-tax money in a traditional, SEP or SIMPLE IRA, part of the conversion becomes taxable, so check your balances before you convert.
A worked example
This example is hypothetical, not a client, and covers federal income tax only. Alex is single and earns $140,000 in W-2 wages in 2026. After the $16,100 standard deduction, Alex's taxable income is $123,900. Alex starts deferring $10,000 into the 401(k) and puts $4,400 into an HSA through payroll, $14,400 in all. Taxable income drops to $109,500. Both amounts sit in the 24% bracket, so federal income tax falls by about $3,456. The HSA dollars also skip Social Security and Medicare tax, and all $14,400 stays Alex's money.
Investments: timing, losses and the wash-sale rule
If you hold an investment for more than one year, your gain is long-term. If you hold it one year or less, the gain is short-term and taxed at the same rates as your salary. For 2026, single filers pay 0% on long-term gains while taxable income stays at or under $49,450, 15% up to $545,500, and 20% above that. For joint filers those two amounts are $98,900 and $613,700. On top of that, the 3.8% net investment income tax can apply once modified AGI is over $200,000 for single filers or $250,000 for joint filers.
Tax-loss harvesting. Selling investments that are down locks in a capital loss. Losses offset your gains first. If your losses are bigger, up to $3,000 a year ($1,500 if married filing separately) comes off your other income, and the rest carries forward to later years.
The wash-sale rule. IRS Publication 550 says a wash sale happens when you sell stock at a loss and, within 30 days before or after the sale, you buy substantially identical stock or acquire it for your IRA or Roth IRA. A purchase by your spouse or a corporation you control counts too. Usually the disallowed loss is added to the cost of the new shares, so it is postponed rather than lost. When the repurchase is inside your IRA or Roth IRA, the loss is not added to the new shares' cost. Selling at a gain and buying back is not a wash sale.
Stock pay: RSUs and ESPPs
RSUs are taxed as wages when the shares are delivered to you, usually at vesting. Employers often withhold federal income tax on that supplemental pay at a flat 22%, which is below the 24% or higher bracket many readers are in, so a balance due in April is common. Raise your withholding or set money aside when shares vest. See why you owe the IRS after selling RSUs.
Shares from an employee stock purchase plan have a holding period requirement. If you sell before you meet it, more of your discount is taxed as wages. If you meet it, part of the gain can be long-term. Check your plan's dates before you sell.
Deductions you may still get
Charity. For 2026 the standard deduction is $16,100 for single filers and $32,200 for joint filers, so many people get no tax benefit from giving. Beginning with 2026, if you do not itemize, you may deduct up to $1,000 ($2,000 if filing jointly) of cash gifts to qualified organizations. If you give more, bunching two or three years of gifts into one year, sometimes through a donor-advised fund, can push you over the standard deduction.
Overtime. For 2025 through 2028, if you receive qualified overtime pay, such as the "half" in time-and-a-half, you may deduct up to $12,500, or $25,000 if you file jointly. The deduction phases out once modified AGI is over $150,000 ($300,000 joint), and you need a valid Social Security number.
Car loan interest. For 2025 through 2028 you may deduct up to $10,000 a year of interest on a loan used to buy a qualified vehicle for personal use, if the loan was originated after December 31, 2024. It phases out over $100,000 of modified AGI ($200,000 joint).
Withholding and estimated tax
After a raise, a bonus or a large stock sale, run the IRS Tax Withholding Estimator and give your employer a new Form W-4. Above $200,000 of wages there is an additional Medicare tax of 0.9%, and your employer must withhold it on wages it pays you over $200,000 without regard to your filing status. A married couple with two incomes can owe more than was withheld. One safe harbor for 2026: pay in at least 110% of your 2025 tax if your 2025 adjusted gross income was over $150,000.
On a work visa: H-1B, L-1 and former F-1 students
You are a resident alien for tax if you pass the substantial presence test: at least 31 days in the U.S. this year and 183 days over three years, using a weighted count. Resident aliens are generally taxed on their worldwide income, the same as U.S. citizens, and file Form 1040. Nonresidents file Form 1040-NR. Days as an F-1 student generally do not count until you have been exempt for more than 5 calendar years, but days on an H-1B count from the start.
If the combined value of your foreign financial accounts exceeded $10,000 at any time during the year, you must file an FBAR. You may also need Form 8938 for specified foreign financial assets. Mutual funds based outside the U.S. are usually passive foreign investment companies (PFICs), which are reported on Form 8621.
How we help
I am Sabih Shafi, an IRS Enrolled Agent, federally licensed to represent taxpayers before the IRS in all 50 states. We work by phone and video, in English or Spanish, with clients nationwide and abroad.
Planning review: we look at a recent pay stub, last year's return and your brokerage statements, and map which of these moves fit you before the year ends.
Returns: W-2 income, stock sales, RSUs and ESPPs, and returns for visa holders.
Foreign accounts: FBAR, Form 8938 and PFIC reporting.
A flat fee quoted in writing before work starts.
Call or text (323) 900-0305, or book your free 20-minute tax review.
Frequently Asked Questions
Can I contribute to a Roth IRA if I earn over $150,000?
It depends on your modified AGI. For 2026, direct contributions phase out between $153,000 and $168,000 for single filers and between $242,000 and $252,000 for joint filers. Above that range, a backdoor Roth is the usual route.
What is the wash-sale rule?
If you sell stock at a loss and buy substantially identical stock within 30 days before or after the sale, the loss is disallowed for now and added to the cost of the new shares. If the repurchase is in your IRA or Roth IRA, the loss is not added to the new shares' cost.
Is an HSA better than a health FSA?
An HSA needs a high-deductible health plan, and the balance stays in your account from year to year. A health FSA has no such plan requirement, but for 2026 at most $680 can carry over, and only if your plan allows it.
How much can a 401(k) cut my taxes?
A pre-tax deferral comes off your taxable wages, so the federal saving is roughly your deferral times your top bracket. In the 24% bracket, $10,000 of deferrals cuts federal income tax by about $2,400.
Do H-1B workers pay U.S. tax on income from home?
Once you pass the substantial presence test you are a resident alien for tax and are generally taxed on your worldwide income, the same as a U.S. citizen. A tax treaty can change how some income is taxed.
Do I have to report bank accounts outside the U.S.?
If the combined value of your foreign financial accounts exceeded $10,000 at any time during the year, you file an FBAR. You may also need Form 8938 with your return.
General information, not tax advice for your situation.
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Talk to an Enrolled Agent
This article is general information, not individual tax advice. If you want to talk through your own IRS or state balance, book a free 20-minute review or call or text us directly.
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