5 Ways Law Firm Partners Can Take More Money Home Without Triggering Bigger Tax Bills

If you’re like most law firm partners, you’re making good money, but it doesn’t always feel like it.

The firm is growing, the books look strong, and yet every year, a sizable chunk of your earnings disappears into taxes, overhead, and reinvestments. What’s left in your pocket doesn’t quite reflect the long hours and high-stakes work you’re putting in.

It’s not that you’re doing anything wrong. In fact, you’ve probably already optimized the basics: 401(k) contributions, business deductions, maybe even some profit-sharing. But if you’re still seeing too much of your profit go towards taxes, it might be time to look at smarter, more targeted strategies for extracting value from your firm.

This article covers five compliant ways to take more money home, without triggering a higher tax bill or disrupting your firm’s structure. Whether it’s bonuses, profit-sharing, or a Cash Balance Plan (CB plan), we’ll show you what each strategy offers, how it impacts your taxes, and which ones help you take more home.

How Can Law Firm Partners Put Away Tax Savings

When your firm is doing well and the profits are steady, it’s only natural to start asking: “How do I get more of this money into my pocket without handing half of it to the IRS?”

Well, the good news is that you have legal and IRS-compliant options. Here are five of the most common strategies law firm partners use to increase take-home income.

1. Bonuses and Year-End Compensation

Bonuses are the simplest way to turn firm profits into personal income. Issue yourself a bonus, increase your W-2 income, or run a year-end compensation adjustment, especially if the firm has had a strong year.

It’s easy, fast, and clean. Your CPA will know precisely what to do, and it doesn’t require plan documents, third-party administrators, or IRS filings. Just cut the check.

But here’s the tradeoff: that income is fully taxable in the year it’s paid. You’ll owe federal income tax, Medicare, Social Security, and potentially state tax as well. For partners already in the 32%, 35%, or 37% brackets, this can result in a significant tax burden

When it makes sense:

• You need cash now and are okay paying taxes at your current marginal rate
• The bonus won’t push you into a higher tax bracket
• Your CPA recommends a timing-based move (e.g., delaying income into next year)

When to think twice:

• You’re already in a high bracket and want to avoid marginal rate spikes
• You’re looking for deductions, not just distributions
• You want the option to defer tax, not trigger it

While bonuses offer immediate access to income, if your goal is tax-efficient compensation, there may be better ways to structure it.

2. Deferred Compensation

If you don’t need the money right now, but want to recognize it on paper, deferred comp can be a smart move. Instead of taking income today and paying tax on it, you earmark it to be paid later, often in a lower-income year or after retirement.

This gives you timing control. You’re still earning the money, but you haven't triggered the tax bill yet. For many partners, deferring income strategically can reduce their overall tax liability by tens of thousands depending on their future bracket.

When it makes sense:

• You expect to be in a lower tax bracket in the future
• You’re close to retirement and want to reduce this year’s tax burden
• You want to smooth out large income spikes over multiple years

When to think twice:

• You may need the funds sooner than expected
• The firm’s future cash flow or stability is uncertain
• The setup isn’t documented clearly, putting the deferral at risk

Deferred compensation can be a useful tool, but it only works if the structure is legally sound and your practice can support the delay.

3. Profit-Sharing Contributions

Profit-sharing is a familiar tool for most firms, and for good reason, it’s flexible, tax-deductible, and easy to integrate with a 401(k). Depending on the design, it can allow partners to contribute up to $66,000–$70,000 in total retirement plan contributions per year on a tax-deferred basis.

It’s technically employer money, but it ends up in your account. And because it’s pre-tax, you defer taxes on that income until retirement.

When it makes sense:

• You already have a 401(k) in place
• You want an easy, compliant way to boost pre-tax contributions
• You’re looking for a partner-friendly structure that still benefits the team

When to think twice:

• You’ve already maxed out your 401(k) and need to go beyond it
• Your income is well above $400,000, and this doesn’t move the needle enough
• You’re looking for larger, strategic deductions.

Profit-sharing is a strong foundation for retirement savings, but by itself, it’s often not enough for high-earning partners looking to reduce significant taxable income.

4. Owner Distributions

For partners structured as LLC members or S Corp shareholders, distributions can be a clean way to pull profits from the firm without triggering payroll taxes like Medicare or Social Security.. It’s simple: once the firm has paid its obligations, the remaining profits flow through to the partners.

These distributions aren’t subject to Social Security or Medicare taxes, which makes them more efficient than a salary. But they’re still fully taxable as income, and they don’t reduce your they don’t reduce your taxable income the way a deductible contribution would.

When it makes sense

• You want to avoid payroll taxes on income you’re already reporting
• Your firm is consistently profitable, and you’ve planned for quarterly estimates
• You’ve already maxed out all available tax-deferred contribution strategies for the year

When to think twice:

• You’re looking for ways to reduce taxable income, not just move it
• You haven’t set aside cash for taxes—this income comes with a tax bill
• Your structure doesn’t allow for distributions (e.g., partners in C Corps or traditional W-2 roles)

While owner distributions can be part of a tax-aware income strategy, they don’t create deductions. If you’re looking to lower your tax liability, not just move money, this isn’t the final stop.

5. Cash Balance Plans

If you’re earning real money and your tax bill keeps climbing, a CB plan may be the most powerful move you haven’t made yet.

Unlike 401(k)s or profit-sharing, CB plans offer significantly higher pre-tax contribution limits, often between $100,000 and $300,000+ per partner annually, depending on your age, income, and plan design. And it’s all tax-deductible to the firm. That means less taxable income on your personal return and more set aside for your future.

Think of it as the top layer of a complete compensation strategy: you’ve already covered the basics, now you’re optimizing what’s possible.

When it makes sense:

• Your income is over $400,000, and you’re already maxing out other retirement plans
• You want large current-year deductions without changing your firm’s structure
• You’d rather pay yourself than send more to the IRS

When to think twice:

• This isn’t a one-size-fits-all product, it needs to be custom-fitted to your firm’s goals and income range
• If your income fluctuates heavily year to year, timing matters
• You’ll want expert guidance (and CPA coordination) to ensure it’s optimized and compliant

A well-designed CB Plan can help you contribute six figures annually on a tax-deferred basis without triggering higher tax brackets or restructuring your practice. It’s the strategy that changes what’s possible.

Quick Comparison: Which Strategy Keeps the Most in Your Pocket?

Not all income extraction methods are built the same. Some are easier to implement but come with a heavy tax tag. Others require more planning up front but unlock far greater savings over time. Here’s how the five strategies stack up so you can see which mix fits your goals:

If your goal is to increase pre-tax savings while minimizing IRS drag, a CB plan is the single most powerful tool for you. While profit-sharing and deferred comp have their place, only CB plans allow six-figure contributions that directly reduce your taxable income today.

For high-earning professionals who have outgrown the limits of a 401(k), a CB plan isn’t just a supplement. It’s an upgrade.

What Could This Look Like in Real Numbers?

Let’s say you’re a law firm partner earning $500,000. You want to extract more income without incurring a larger tax burden. Here’s how the five most common strategies stack up:

What’s the Takeaway?

• Bonuses and distributions put cash in your pocket today, but come with a full tax bill.
• Profit-sharing and CB plans reduce your tax liability now while building retirement wealth.
• Deferred comp can be helpful, but it often lacks impact for partners seeking current-year savings.

By layering a CB plan on top of your existing strategies, you could double or triple your deductions, without increasing employee costs or overhauling your firm’s structure.

Now imagine redirecting nearly $100,000 from the IRS into your retirement plan, without changing your firm structure, payroll, or compensation model. That’s the kind of result thoughtful income planning delivers.

And if you’re married and filing jointly, it gets even better. A well-timed CB plan could help you drop from the 35% bracket back into the 24% zone, giving you more control over what you keep. This is how high-income partners extract more profit in an efficient, IRS-compliant manner without any disruption.

Want to Take More Home? Start Planning Like It.

Most partners assume they’ve hit their limit once they’ve maxed out a 401(k) or taken a bonus. However, earning more doesn’t have to mean paying more to the IRS.

There’s a smarter, fully compliant way to take more money home, without triggering audits, changing your firm’s structure, or adding complexity. Whether it’s layering in a CB plan, optimizing profit-sharing, or using distributions more strategically, the right income strategy gives you control over what you keep.

You don’t have to figure it out alone. We work closely with law firm partners every day to run the numbers and design plans that align with their income goals and firm setup.

Disclosure: The information provided on this website is for general informational and educational purposes only and is not intended as legal, tax, or investment advice. Actual tax savings will vary based on your individual circumstances, including filing status, income level, existing retirement plans, and other deductions. Cash Balance Plans and other retirement strategies must be carefully structured and administered to comply with IRS regulations. You should consult with a qualified tax advisor, financial planner, and/or pension specialist before implementing any strategy discussed here.