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.
If you’re a law firm partner pulling in substantial profits but not seeing it in your take-home, you’re likely missing smarter extraction tools. These five strategies, including one that could cut your tax bill by significantly, help you keep more without adding complexity or raising IRS flags.
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.
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
While bonuses offer immediate access to income, if your goal is tax-efficient compensation, there may be better ways to structure it.
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.
Deferred compensation can be a useful tool, but it only works if the structure is legally sound and your practice can support the delay.
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:
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.
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
When to think twice:
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.
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:
When to think twice:
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.
We’ll show you how much more you could be keeping using strategies that top law firm partners already use
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:
| Stratergy | Pros | Cons |
| Bonuses | Easy to issue, ties to performance | Taxed at current income rates, no deduction benefit |
| Profit-Sharing | Tax-deductible, integrates with 401(k), team-friendly | Capped at ~$66,000–$70,000, testing required |
| Distributions | No payroll tax, simple to take | Fully taxable, does not reduce taxable income |
| Deferred Comp | Delay taxes, can offer flexibility | No upfront write-off, not ideal for partners |
| Cash Balance Plan | $100,000–$300,000+ pre-tax contributions,, lowers current tax bill | Needs plan design and admin support |
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.
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:
| Strategy | Contribution / Payout | Tax Treatment | Estimated Tax Savings |
| Bonus | $100,000 | Taxed at 35% as ordinary income | $0 – full tax owed (~$35,000) |
| Profit-Sharing | $50,000 | Pre-tax if within 401(k) limits | ~$17,500 |
| Owner Distribution | $100,000 | Pass-through income on K-1 | $0 – fully taxable, no deduction |
| Deferred Comp | $50,000 | Taxed later when received | Varies – no upfront tax savings |
| Cash Balance Plan | $200,000 | Fully deductible contribution | ~$70,000 (at 35% bracket) |
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.
We get it, reading every word doesn’t always make the calendar. So here’s the quick take:
You’ve got more than one way to extract profit without giving up more to the IRS.
If you’re earning high six figures and not using a layered approach, you’re likely leaving significant money on the table. Let’s change that.
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.
You’ve earned it. Now let’s figure out how much more of it you can keep.
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.