Why Is My Tax Bill So High This Year?

What High-Income Earners Should Know in 2025 and Beyond

If your income is strong but your tax bill seems even stronger, you’re not alone. Many high-net-worth individuals are surprised to find they owe far more than expected — even after making what feel like smart financial moves.

At Velin & Associates, Inc., we regularly work with successful entrepreneurs, medical professionals, content creators, and investors who ask this very question. Let’s explore why your tax bill may have spiked this year — and what strategic tax planning can do about it.

1. You Earned More — But Didn’t Adjust Your Tax Strategy

A good year in business, investments, or real estate is worth celebrating. But more income can push you into:

• The 37% top federal tax bracket
• Additional state income tax in California (up to 13.3%)
• Phaseouts of deductions and credits
• The 3.8% Net Investment Income Tax (NIIT)

High earnings demand proactive planning — not just reactive filing. If your income jumped but your tax strategy didn’t change, a large bill is the natural result.

2. New Tax Laws or Expired Provisions Hit You Hard

In 2025, several provisions from the 2017 Tax Cuts and Jobs Act (TCJA) are under review or set to expire by 2026, including:

• The $10,000 SALT deduction cap (temporarily increased for some households in 2025)
• Lower thresholds for the estate and gift tax exemption
• Bonus depreciation starting to phase down

If your tax plan didn’t evolve with the law, you may have lost valuable deductions or hit new liabilities.

3. Business Profits Increased Without Proper Structuring

For high-earning creators, consultants, and professionals, your business entity structure can either:
✅ Help reduce your taxable income
🚫 Or force you to overpay

For example:

• Operating as a sole proprietor when an S-Corp could reduce self-employment tax
• Failing to capitalize deductions or defer income at year-end
• Not using retirement plans like a Solo 401(k) or Defined Benefit Plan to lower income

Business growth is great — but without structural tax planning, your tax bill will grow faster than your profits.4

4. Real Estate and Investment Moves Triggered Capital Gains

Sold a property? Exercised stock options? Cashed out from your brokerage account?

Capital gains may be taxed at:

• 15% or 20% federally (plus the 3.8% surtax if you’re a high earner)
• Up to 13.3% in California

Even if reinvested, gains are still taxed unless managed with tools like:

• 1031 exchanges (for real estate)
• Opportunity Zone investments
• Tax-loss harvesting

If your CPA didn’t help you time or offset those gains, it could explain the jump in taxes.

5. You Missed Out on Deductions, Contributions, or Credits

Many high-income earners leave money on the table by not:

• Maxing out HSA, IRA, or Solo 401(k) contributions
• Bunching charitable donations to exceed the standard deduction
• Using depreciation or other business-specific write-offs
• Reviewing QBI (qualified business income) deductions eligibility

Missed opportunities mean more of your income is exposed to full taxation — and that adds up quickly.

6. You Didn’t Estimate or Pay Taxes Throughout the Year

High earners must often make quarterly estimated payments — and if you didn’t, you could be hit with:

• Underpayment penalties
• A large unexpected lump sum in April
• Cash flow stress and delayed financial goals

Even smart earners sometimes forget to adjust payments after a strong business year, property sale, or investment gain.

What You Can Do Now

If your tax bill shocked you this year, don’t repeat the same mistake. High income requires high-level planning, not just tax prep.

At Velin & Associates, Inc., we offer:

• Strategic entity structuring
• Multi-year tax projections
• Investment and retirement optimization
• Real estate and asset planning
• Business tax planning for creators, doctors, e-commerce sellers, and professionals

You Don’t Need to Earn Less — You Need to Plan Better

A large tax bill is a symptom — not a punishment. With the right tax strategy, you can keep more of what you earn, legally reduce your liability, and invest smarter for the future.

Let’s Rethink Your Tax Strategy — Before the Next Bill Hits

Velin & Associates, Inc.
8159 Santa Monica Blvd STE 198/200
West Hollywood, CA 90046
📞 323-902-1000
📧 dmitriy@losangelescpa.org
🌐 www.losangelescpa.org