No one loves taxes. Well, maybe some accountants do, but for most high-net-worth individuals, tax planning is less about excitement and more about strategy. And let’s be honest—you didn’t work this hard to let unnecessary taxes chip away at your wealth.
The good news? You’ve got options. With the right moves, you can minimize your tax bill while staying on the IRS’s good side. It’s all about knowing the rules and using them to your advantage. Let’s walk through a few strategies that can make a real difference.
Put Tax-Advantaged Accounts to Work
Maxing out a 401(k) is great, but for high earners, that’s just the beginning. There are plenty of other tax shelters worth using.
Backdoor Roth IRA – Can’t contribute to a Roth because you earn too much? There’s a workaround. You put money into a traditional IRA and convert it to a Roth. No income limits, just tax-free growth for life.
Health Savings Accounts (HSA) – Think of this as a stealth retirement account. Contributions are tax-deductible, the money grows tax-free, and withdrawals for medical expenses aren’t taxed either. Triple tax advantage.
529 Plans – Even if you don’t have kids in college, this can be a smart way to pass on wealth. Plus, starting in 2024, leftover 529 funds can be rolled into a Roth IRA under certain conditions.
If you’re only using the basics—401(k) and taxable brokerage—you’re leaving tax savings on the table.
Turn Market Losses Into Tax Wins
Losing money on an investment stings. But what if that loss could lower your tax bill? That’s where tax-loss harvesting comes in.
Sell losing investments to offset gains – If you made money on some stocks, selling a losing position can balance things out, reducing your taxable gains.
Use losses against ordinary income – Up to $3,000 in losses can be deducted from your income each year. Not life-changing, but it helps.
Reinvest wisely – Just don’t rebuy the same stock immediately (thanks to the wash-sale rule). Pick something similar if you want to stay invested.
This isn’t just for bear markets, either. Even in good years, a little strategic pruning can save you big.
Charitable Giving: Do Good, Save Money
If you’re already giving to charity, you might as well do it in the most tax-efficient way possible.
Donor-Advised Funds (DAFs) – Front-load multiple years’ worth of donations for a big deduction now, then spread out the giving over time.
Qualified Charitable Distributions (QCDs) – If you’re 70½ or older, you can send up to $105,000 per year directly from your IRA to charity, satisfying RMDs while avoiding taxable income.
Donate Appreciated Assets – Giving stock instead of cash means you skip capital gains taxes while still getting a full deduction. A win-win.
It’s not just about generosity—it’s about being smart with your giving.
Estate and Gift Planning: Move Wealth Early
If your estate is above the federal exemption (currently $13.61 million per person in 2024), taxes will eventually come knocking. The solution? Start shifting assets early.
Annual Gift Tax Exclusion – You can give up to $18,000 per recipient per year, tax-free. Do this every year, and it adds up fast.
GRATs (Grantor Retained Annuity Trusts) – This fancy trust lets you pass on asset growth without triggering a big tax bill.
Irrevocable Life Insurance Trusts (ILITs) – Keeps life insurance payouts outside your taxable estate.
Estate planning might not be the most thrilling topic, but it’s one of the smartest ways to keep wealth in the family.
Business and Real Estate Tax Strategies
If you own a business or invest in real estate, there are even more ways to optimize your taxes.
Pass-Through Deduction (QBI) – If you own an LLC, S-Corp, or partnership, you might qualify for a 20% deduction on business income.
1031 Exchanges – Swap one investment property for another and defer capital gains taxes. (There’s a reason real estate investors love this loophole.)
Cost Segregation Studies – Accelerates depreciation on commercial properties, creating big tax deductions upfront.
For those with business income, a little tax planning can mean keeping tens or even hundreds of thousands more in your pocket.
Should You Move to a Low-Tax State?
If you live in a high-tax state like California or New York, state income taxes alone can eat into your wealth. That’s why some high-net-worth individuals consider relocating to states with no income tax—think Florida, Texas, or Nevada.
But before you start packing:
Simply owning property in another state isn’t enough—the IRS looks at where you actually live and spend time.
Some states aggressively audit former residents to prove they still owe state taxes.
There are legal ways to establish residency elsewhere, but it takes careful planning.
Moving just for tax savings isn’t a decision to take lightly. But for the right person, it can mean a massive long-term benefit.
Final Thought: Start Tax Planning Now for High-Net-Worth
The worst time to think about taxes? April 15th. By then, most of your options are off the table. Smart tax planning happens year-round.
At Halter Ferguson Financial, we help high-net-worth individuals build tax-efficient wealth strategies that work for their unique situation. If you want a second opinion on your tax plan—or need a team that knows how to optimize every dollar—let’s talk.