As a W-2 music executive, your compensation can include base salary, bonuses, and equity awards. Without planning, your tax bill can grow quickly.
Here are six tax strategies for music executives to reduce your 2025 tax burden.
1. Maximize pre-tax retirement contributions
Reduce your taxable income by contributing to all available retirement accounts:
- 401(k) plans: Contribute up to $23,500 in 2025 ($31,000 if you’re 50+). Take full advantage of employer matching.
- Traditional IRA: If eligible, contribute up to $7,000 ($8,000 if 50+) and reduce taxable income.
If your income is too high for a deductible IRA, consider a backdoor Roth IRA strategy.
2. Optimize your equity compensation strategy
If your compensation includes RSUs, stock options, or private equity, a tax-aware approach can save you money.
- RSUs: Taxed as ordinary income when they vest. If possible, time your sales to avoid pushing income into a higher tax bracket.
- ISOs: If offered, holding shares more than a year after exercise may qualify you for long-term capital gains rates.
- Private equity or buyouts: Work with a tax pro to explore structuring large payouts in ways that may reduce tax impact.
Don’t let shares vest or sell automatically. Coordinate with your overall tax strategy.
3. Plan for tax-efficient charitable giving
If you give to charity, structure it to reduce your tax bill:
Qualified Charitable Distributions (QCDs): If you’re over 70.5, donate from your IRA tax-free to reduce RMDs.
Donor-Advised Funds (DAFs): Donate appreciated stock for an immediate deduction and to avoid capital gains.
4. Use a tax-efficient investment strategy
Structure your portfolio to limit taxes:
- Prioritize tax-advantaged accounts (401(k), IRA, HSA) before investing in taxable accounts.
- Hold investments longer than one year to benefit from long-term capital gains rates.
- Place tax-inefficient assets (like bonds or active funds) in tax-deferred accounts.
- Keep low-turnover investments (like index funds) in taxable accounts.
Large cash bonuses? Consider deferring income if your employer offers a deferred comp plan.
5. Evaluate employer benefits with tax impact in mind
Your total comp package includes benefits that impact your tax situation:
- Health Savings Accounts (HSAs): If you’re in a high-deductible plan, contribute up to $4,300 (individual) or $8,550 (family) in 2025. Contributions are tax-deductible, and growth is tax-free.
- Flexible Spending Accounts (FSAs): Use for healthcare or dependent care expenses.
- Employee Stock Purchase Plans (ESPPs): Understand how and when shares are taxed. Holding shares for at least one year post-purchase may lead to better tax treatment.
6. Work with a planner who knows the music business
Your tax strategy should reflect your role, comp structure, and goals. A generic approach won’t cut it.
At Motif Planning, we help music and entertainment executives reduce taxes, build wealth, and protect their financial future.
Want to pay less in taxes this year?
Book a call to get a custom tax plan that fits your career.
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Bottom line
Most music executives overpay in taxes because they don’t have a plan. Use these tax strategies for music executives to reduce what you owe and keep more of what you earn.
