What Does A Modern Tax Strategy Look Like For Tech Executives?
True Root Financial is a financial advisor and financial planner based in San Francisco, CA. We serve clients across the globe.
For successful tech professionals, taxes often become the largest drag on wealth i.e. larger than housing, lifestyle, or even investment fees. RSUs vest, stock options are exercised, and concentrated equity positions grow quietly in the background. Without a proactive tax strategy, a meaningful portion of that hard-earned wealth can be lost to federal and state taxes.
If you are a tech professional interested in learning how we can help you claim your financial independence by investing wisely, minimizing taxes, and maximizing your equity compensation, please book a no-obligation call here.
Key Takeaways:
- Tax-loss harvesting can offset RSU income and capital gains
- Active loss generation creates tax assets even in rising markets
- Municipal bonds can significantly reduce taxable income in high-tax states
- After-tax returns matter more than headline performance
Turning Market Volatility Into Tax Savings
One of the foundations of our investment process is systematic tax-loss harvesting. When parts of your portfolio temporarily decline, we realize those losses and reinvest in highly similar securities maintaining your market exposure while capturing tax benefits.
Those losses can be used to offset gains from:
- RSU sales
- Stock option exercises
- Capital gains from concentrated equity positions
Example:
If you realize $200,000 in RSU income and harvest $50,000 in investment losses, your taxable gain drops to $150,000. For many high-income California tech professionals, that can translate into $12,000–$15,000 in federal tax savings, before state taxes are even considered.
The Challenge: Markets Don’t Stay Down for Long
Traditional tax-loss harvesting often falls short because markets trend upward over time. That means fewer opportunities to realize losses especially for long-term investors.
Our solution is an active, disciplined investment approach designed to:
- Keep your portfolio fully invested for growth
- Capture small losses continuously not just during downturns
By diversifying across hundreds of securities, we’re able to identify positions that dip below their cost basis, harvest targeted losses, and reinvest immediately in comparable holdings. This process maintains portfolio risk while steadily building tax assets.
Think of it as daily maintenance, not emergency repairs. Over time, these small adjustments can materially improve after-tax performance compared to a passive buy-and-hold strategy.
A Better Client Experience at Tax Time
One of our clients, a senior tech executive shared that after implementing this strategy, tax season stopped being stressful. Instead of surprises, he had clarity. He knew well in advance what his tax exposure looked like and how it fit into his broader financial plan.
That peace of mind is often just as valuable as the tax savings themselves.
Using Municipal Bonds to Reduce Taxable Income
For fixed-income allocations, we often recommend state-specific municipal bonds, particularly for tech professionals in high-tax states like California.
Example:
A client with a $5 million portfolio, a 37% federal tax rate, and California residency allocated 20% of her portfolio to high-quality municipal bonds. The result:
- $40,000 reduction in annual taxable income
- Approximately $16,000 in federal tax savings, plus state benefits
Municipal bonds can play a powerful role in tax-efficient portfolio construction, especially for executives nearing financial independence.
Why After-Tax Returns Are What Truly Matter
Chasing the highest pretax return can be misleading. What actually determines financial independence is how much you keep after taxes.
By combining:
- Ongoing tax-loss harvesting
- Active loss generation strategies
- Strategic municipal bond allocations
True Root Financial helps tech professionals retain more of their wealth without taking unnecessary investment risk.
Your Next Step
Smart tax planning isn’t optional for high-earning tech professionals, it’s essential. If you earn significant equity compensation, live in a high-tax state, or hold a concentrated stock position, proactive planning can make a measurable difference. Book a free consultation below to explore how a tax-efficient investment strategy can support your long-term financial independence.
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