For many professionals in the Bay Area, tax season is experienced as an annual obligation rather than a planning opportunity. Returns get filed, checks get written to the Franchise Tax Board (FTB) and the Internal Revenue Service (IRS), and the process is set aside until next April. But the information surfaced during tax season, from the size of your tax bill to the sources of your income and the composition of your portfolio, can point to gaps in a financial plan that are worth addressing before year-end. For California residents, where state income taxes are among the highest in the country, what your return reveals deserves a closer look for opportunities to improve your after-tax returns.

Did Your Tax Bill Come as a Surprise?

An unexpectedly large tax bill, or a refund that was far larger than anticipated, is often a signal that withholding or estimated payments are out of alignment with actual income. For professionals receiving significant equity compensation, RSU vesting events, significant changes in the value of the underlying company stock, and the timing of option exercises can create material swings in taxable income from year to year that are easy to underestimate. If your bill was larger than expected, it may be worth revisiting your withholding elections from your wages or estimated payment schedule before the next quarterly deadline to avoid a similar outcome next filing season. Many companies allow their employees to customize, to some degree, their Federal and California tax withholdings, which we recommend adjusting to avoid a “six figure tax bill surprise” that we see amongst our technology professional clients. For those who can’t adjust their tax withholdings, religiously following quarterly tax payments will soften the blow of your annual tax return filing payment.

Going further, if you aren’t regularly selling RSUs to diversify into a broader stock portfolio or holding the cash as reserves, you may find yourself coming up short in cashflow around tax payment time. We advocate for a disciplined sale strategy of vesting employee stock compensation each vesting period. What’s worse, you don’t want to be in a position where you are unable to sell your employer stock to raise cash for taxes due to an employer trading blackout window. Setting up alternate sources of liquidity is one hedge against this risk to help better manage your cash needs throughout the year.

Did the State and Local Tax (SALT) Deduction Work in Your Favor?

Under the One Big Beautiful Bill Act, the federal State and Local Tax (SALT) deduction cap was raised to $40,000 for the 2025 tax year. For California residents who itemize their deductions, this change may have meaningfully reduced federal taxable income compared to prior years. However, the benefit phases out for higher earners, with the cap declining for modified adjusted gross income (MAGI), which broadly reflects your total income minus certain above-the-line deductions, above $500,000 and effectively reverting toward the prior limit at higher income levels. If your 2025 return reflected less SALT benefit than expected due to income phaseouts, that is worth understanding now as you think about income planning for 2026. The elevated cap remains in effect through 2029, and for professionals with some flexibility around the timing of income, bonus elections, retirement contributions, or equity compensation decisions, there may be opportunities to manage MAGI in a way that preserves more of the deduction in future years. What your 2025 return revealed about where your income landed relative to those thresholds is a useful starting point for that conversation.

Are Your Retirement Contributions Keeping Pace With Your Income?

Tax season often surfaces whether retirement contributions are proportionate to income, particularly for professionals whose compensation has grown significantly through equity events or promotions. California offers no state deduction for Roth contributions and conforms to federal limits on traditional retirement accounts, meaning the available tax-deferred savings opportunities are the same as federally but the state tax relief on traditional contributions can be meaningful given California’s rate structure. If your return suggests room to increase contributions, the period immediately following tax season is a practical time to revisit those elections.

We find that our clients who are at or above the 24% marginal tax bracket will usually benefit most from maximizing their pre-tax contributions to any retirement accounts [e.g. 401(k)]. Given the current tax burden working Bay Area professionals face, we encourage every client to maximize the available tax deductions they have at their disposal, which unfortunately is rather limited when you are earning ordinary wage income.

Like we tell all our California clients, the oppressive nature of the tax code on wage income flips once clients hit retirement. California treats retirees well once you start living off your portfolio and Social Security. No need to uproot for places like Florida or Wyoming for just tax reasons alone!

What Does Your Return Suggest About Year-End Planning Priorities?

Beyond the numbers themselves, a completed tax return can help identify planning priorities or opportunities for the remainder of the year. Helping clients keep more of what they earn is value added and your tax return is the source for finding these opportunities. For professionals with concentrated equity positions, it may highlight the potential benefit of a more systematic approach to diversification or tax-loss harvesting. For those with charitable intent, it may surface whether donor-advised funds or direct gifts of appreciated stock were used efficiently. And for those approaching significant liquidity events, it may underscore the value of coordinating timing decisions with a broader tax strategy before year-end rather than after.

If your return surfaced questions about your current approach, we are here to work through them with you.

Tony Blagrove, CFA, CFP
Founder, CEO
Direct: (650) 397.2395
Tony.Blagrove@TravekaWealth.com

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