Here’s the One Tax Strategy Billionaires Use That You Can Copy in 2026
Written by
Laura Beck
Edited by
Molly Sullivan
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Billionaires use tax strategies that sound complicated and out of anyone else’s league, but some of them work for regular high earners too.
The best one flies under the radar because most people have never heard of it and some financial advisors don’t even know it exists.
The Mega Backdoor Roth Solves a Rich Person Problem
Anthony DeLuca, a CFP and CDFA who oversees approximately $170 million in client assets for Delta Advisory Group, explained the strategy ultra-wealthy individuals use that high-income earners can copy.
“After many financial planning meetings, a continuous theme that shows with higher income earners is that they take home too much money,” DeLuca said. “They outkick their coverage as far as their expenses are concerned, and they are left with too much taxed dollars sitting in their bank accounts.”
The mega backdoor Roth within a 401(k) addresses this problem. Most people max out pretax 401(k) contributions at $23,500 in 2026 and think they’re done. But the total 401(k) contribution limit including employer contributions is $72,000.
The gap between those numbers creates opportunity.
How the Strategy Actually Works
If your 401(k) plan allows it, you make additional contributions on an after-tax basis above the standard employee contribution limit. This amount gets subtracted from the employer contribution up to the $72,000 max.
Then you immediately convert those after-tax contributions into Roth assets within the plan. You accomplished two things: maxed out your pretax 401(k) contribution and substantially built up a Roth bucket at the same time.
“It’s a way better use of your money today, and a much better tax decision for tomorrow,” DeLuca said.
The strategy helps avoid required minimum distribution problems in retirement. High earners who save aggressively in pretax accounts often face substantial tax burdens when RMDs kick in at age 73. Roth conversions in retirement help, but the mega backdoor roth lets you build that tax-free bucket starting now.
Most Plans Don’t Offer This Option
The catch is your employer’s 401(k) plan must allow after-tax contributions and in-plan Roth conversions. Many plans don’t offer these features, especially at smaller companies. You need to check with your plan administrator.
If your plan does allow it, you need significant disposable income to take advantage. Contributing $30,000 to $50,000 beyond the standard limit only works if your budget can handle it.
Runner-Up Strategy: Donor-Advised Funds
Michael Robustelli, partner and private wealth advisor at Fortivus Wealth Group, recommended charitable giving strategies that billionaires use regularly.
Donor-advised funds work like charitable investment accounts managed by nonprofits. You contribute money, receive an immediate tax deduction and the funds grow tax-free. Then you recommend grants to charities over time.
“DAFs are popular because they’re simple, flexible and allow you to bunch donations for bigger tax benefits,” Robustelli said.
The bunching strategy helps if your annual giving doesn’t exceed the standard deduction. Make multiple years’ worth of donations in one tax year to push itemized deductions above the threshold and lower taxable income.
Charitable Trusts for Long-Term Planning
For people with appreciated assets or long-term goals, charitable remainder trusts and charitable lead trusts offer additional benefits.
CRTs provide income to you while leaving the remainder to charity. CLTs give income to charity first, then return assets to your heirs. Both strategies reduce capital gains taxes and create future income streams.
“Charitable giving is a win-win: You support causes you care about and reduce your tax liability,” Robustelli said. “Working with a financial advisor can help you choose the right approach for your situation.”
The Difference Between Billionaire and Non-Billionaire Strategies
Billionaires use these strategies at a massive scale. A $10 million contribution to a donor-advised fund generates a $3.7 million tax deduction at the top federal rate. A mega backdoor Roth matters less when you have unlimited wealth, but charitable trusts help transfer billions to heirs tax-efficiently.
Regular high earners can copy the mechanics at a smaller scale. A $50,000 mega backdoor Roth contribution builds serious tax-free wealth over 20 to 30 years. A $20,000 donation to a DAF generates immediate deductions while supporting causes you care about.
The strategies work the same way regardless of wealth level. You just need enough income to make them worthwhile and a financial advisor who actually knows these options exist.
Most people stick with basic 401(k) contributions and occasional charitable donations. The wealthy build entire tax strategies around maximizing every available tool. The gap between those approaches compounds into millions of dollars over a career.
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