Below is a look at the tax deductions for high-income earners commonly overlooked, starting with federal opportunities and finishing with a few that are specific to South Carolina. Some of these you can act on before the filing deadline. Others are worth building into your strategy for next year.
If you’re contributing to a 401(k) but not hitting the annual limit, that’s the most straightforward deduction left on the table. For 2025, the employee contribution limit is $23,500, with an additional $7,500 catch-up contribution available if you’re 50 or older. But if you own a business or have self-employment income, there’s more available to you beyond that.
A SEP-IRA lets self-employed individuals and small business owners contribute up to 25% of net self-employment income, up to $70,000 in 2025. A Solo 401(k) can be even more powerful, combining employee and employer contributions for a combined limit of up to $70,000, or $77,500 with catch-up contributions. These contributions reduce your federal adjusted gross income dollar-for-dollar, which also lowers your South Carolina taxable income since the state starts with your federal AGI.
If you’re a high earner who’s been told you can’t contribute to a Roth IRA, the backdoor Roth conversion is worth knowing about. It’s not a current-year deduction, but it’s a legitimate tax strategy that can pay off significantly over time.
If you’re enrolled in a high-deductible health plan, an HSA is one of the most efficient tax vehicles available to any earner. Contributions are deductible above the line, meaning you don’t need to itemize to claim them. Growth inside the account is tax-free. And withdrawals for qualified medical expenses are also tax-free.
For 2025, the contribution limit is $4,300 for individual coverage and $8,550 for family coverage, with an additional $1,000 catch-up if you’re 55 or older. Many high-income earners contribute to an HSA but make the mistake of spending it down each year. If you can cover current medical costs out of pocket, letting HSA funds grow untouched is a meaningful long-term wealth strategy.
South Carolina conforms to the federal HSA deduction, so your contributions reduce both your federal and state taxable income.
The $10,000 cap on state and local tax (SALT) deductions has been a significant hit for high-income itemizers since 2018. If you’re paying substantial South Carolina income tax and property taxes on a higher-value home, you’ve likely felt it. Pending federal legislation has proposed raising the SALT cap to $40,000 for most filers (with a phaseout beginning at $500,000 of income), but as of this writing, that change isn’t law yet.
In the meantime, there are a few ways high earners can work around the SALT limitation. Charitable contribution bunching, accelerating multiple years of giving into one tax year using a Donor Advised Fund, can help you clear the itemization threshold and make the most of your remaining deductions. Mortgage interest on primary and secondary residences also continues to be deductible up to the $750,000 loan limit, which remains a meaningful deduction for South Carolina homeowners in higher price markets like Charleston, Greenville, and Hilton Head.
This is one of the most valuable South Carolina tax deductions that high earners frequently underuse. South Carolina allows a deduction equal to 44% of net capital gains recognized during the year. That means if you sold appreciated securities, real estate, or a business interest, nearly half of your long-term gains can be excluded from SC taxable income.
Given that South Carolina’s top marginal income tax rate is 6% in 2025, that 44% deduction effectively cuts your SC capital gains rate to roughly 3.4%, a meaningful reduction for investors managing significant taxable portfolios. This deduction is calculated automatically on your SC return based on your federal Schedule D, but it’s worth confirming it’s being applied correctly, particularly in years with large gain events.
High-income earners in South Carolina have access to deductions most tax software won’t surface on its own. Let’s take a closer look at your situation.
High earners with taxable investment accounts have an ongoing opportunity to reduce their tax burden through tax loss harvesting, selling securities that have declined in value to realize a loss that offsets taxable gains. Capital losses can offset capital gains dollar-for-dollar, and if losses exceed gains, up to $3,000 of the excess can be deducted against ordinary income each year. Unused losses carry forward indefinitely.
In a volatile market, systematic harvesting throughout the year, not just in December, can generate thousands of dollars in tax savings. This pairs well with South Carolina’s 44% capital gain deduction: strategic loss harvesting on the federal side, combined with the SC deduction on gains you do realize, can compress your effective rate on investment income considerably.
Most states that offer a 529 deduction cap it at a relatively modest amount, often $5,000 to $10,000 per year. South Carolina doesn’t. Contributions to the SC Future Scholar 529 plan are fully deductible from South Carolina taxable income with no annual cap. For a high-income earner who’s able to front-load a 529, or make a large contribution in a high-income year, this can be a substantial state-level deduction.
Contributions made between January 1, 2025 and April 15, 2026 are deductible on your 2025 South Carolina return, giving you a window to contribute after year-end and still claim the deduction. This is one of the more underused tools in the SC tax planning toolkit, particularly for business owners who have more flexibility around the timing of income.
If you own a pass-through business, an S corporation, partnership, sole proprietorship, or LLC,you may qualify for the Section 199A Qualified Business Income (QBI) deduction, which allows eligible owners to deduct up to 20% of qualified business income. For high-income earners, the deduction phases out depending on your industry and income level, but it’s far from all-or-nothing.
For non-service businesses, the deduction is available to higher earners subject to W-2 wage and property limitations. For Specialized Service Trade or Business (SSTB) owners, physicians, attorneys, consultants, and financial professionals, the deduction phases out at higher income levels. However, proposed federal legislation would modify those rules in ways that could make the deduction accessible to more SSTB owners at higher income thresholds. If you’re an SC business owner who’s been told you don’t qualify, it’s worth revisiting with a tax professional, especially given potential legislative changes.
The Alternative Minimum Tax is less of a widespread concern than it was before 2018, but it’s still a real risk for high earners in specific situations: exercising incentive stock options, generating significant tax preference income, or having very large itemized deductions. The AMT exemption for 2025 is $137,000 for married filers and $88,100 for single filers, with phaseouts beginning at $1,232,600 and $626,350 respectively.
If any of those scenarios apply to you, it’s worth running an AMT calculation before year-end. Several deductions that reduce your regular tax liability don’t reduce AMT exposure, which can make proactive planning meaningfully different from filing-season cleanup.
The deductions available to high-income earners in South Carolina aren’t complicated in isolation, but the interaction between federal and state rules, income phaseouts, the SALT cap, the QBI deduction, and SC tax credits means the right strategy depends heavily on your specific income sources and financial situation. A deduction that saves one high earner significantly can be partially or fully unavailable to another at a slightly different income level.
The highest-value tax planning for high earners usually happens before December 31, not in April. If you want to make sure you’re capturing every deduction available to you, and that you’re not carrying exposure you don’t have to, Manley Garvin works with high-income earners across South Carolina and the Southeast to build strategies that go beyond the basics. Contact us today to schedule a consultation.
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