Law Firm Partner Saves $578K in Taxes

Tax Planning Results at a Glance

These results reflect this client's specific financial situation and are not typical. Tax savings depend on individual income, filing status, entity structure, investment capacity, and other factors. Past results do not guarantee similar outcomes. This is not tax advice. Consult a qualified professional before making tax planning decisions.

The Situation

James is a 45-year-old attorney and shareholder in a New York City law firm handling personalized legal work. He lives with his wife and kids. Between his W-2 income of $518,544, K-1 passthrough income of $1,025,694, and $156,962 in investment income, his total income was $1,701,200.

His firm already had a solid tax approach in place. They had a defined benefit plan. They were handling HSA contributions. The S-Corp structure was set up properly. The firm's was doing the small things right.

But James was still paying $779,266 in taxes. A 45.8% effective rate. Federal taxes alone were $562,526. New York State and New York City taxes added $216,740. When nearly half of every dollar goes to taxes, even a well-run firm structure has its limits. James came to us to see if there was anything else to be done.

What We Did

The challenge here was different from most clients. The obvious moves had already been made at the firm level. We needed to find savings outside the law practice itself.

We worked with James on a tax-efficient investment. His wife had been a stay-at-home mom with some available time, and we helped her set up a business generating real income from year one. The business itself produced cash flow, but the tax structure around it created depreciation large enough to offset a sizable portion of James's federal and state tax liability.

On top of the investment, we provided continuous tax planning support with multiple meetings throughout the year. With income at this level coming from multiple sources (W-2, K-1, and investments), the planning has to be proactive and not reactive.

The Results

James's total tax dropped from $779,266 to $200,773. A savings of $578,493. His effective tax rate went from 45.8% to 11.8%, a 34 percentage point reduction. Federal taxes, which had been $515,168, dropped to roughly $5,000. Depreciation from the investment drove most of the reduction and also limited his state tax exposure.

The approach required James to invest $187,322 of his own capital. After the investment and our $32,000 planning fee, his net savings came to $359,171. For every dollar he spent on our fee, he saved $18.10 in taxes.

The business his wife started is not a tax play alone. It is cash-flow positive and gives the family a second income stream outside the law firm. Long-term value beyond the tax savings.

What James Had to Say

Key Takeaways