Nine Strategies to Minimize Taxes for High Net Worth individuals

Clients come to our iWealth Advisors asking for strategies in how to minimize their tax bill. Over the years, we’ve put together content on how high net worth individuals can employ several strategies to minimize their tax burden:

Maximize Retirement Account Contributions

Contribute the maximum allowed to 401(k)s, IRAs, and other qualified retirement plans to reduce taxable income.

Utilize Charitable Giving Strategies

Consider implementing the following:

• Qualified Charitable Distributions (QCDs) from IRAs for those over 70½
• Donor-advised funds for upfront tax deductions
• Charitable remainder trusts for appreciated assets

Invest In Tax-Efficient Assets

• Municipal bonds for tax-exempt interest
• Tax-efficient index funds and ETFs
• Real estate for various deductions

Employ Tax-Loss Harvesting

Sell underperforming investments to offset capital gains.

Consider Roth IRA Conversions

Convert traditional IRAs to Roth IRAs strategically to manage future tax liability.

Take Advantage of Gifting Strategies

Use the annual gift tax exclusion and lifetime gift tax exemption to transfer wealth tax-efficiently.

Explore Business Structuring Options

Incorporation or other entity structures may offer tax advantages for business owners.

Invest in Life Insurance Policies

Properly structured policies can provide tax-free benefits to beneficiaries.

Maximize Health Savings Account (HSA) Contributions

HSAs offer triple tax advantages: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

It’s crucial to work with experienced financial planners, like iWealth, and tax advisors to implement these strategies effectively and in compliance with current tax laws.

Disclosures:
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Bonds are subject to availability, change in price, call features and credit risk.

ETFs trade like stocks, are subject to investment risk, fluctuate in market value, and may trade at prices above or below the ETF’s net asset value (NAV). Upon redemption, the value of fund shares may be worth more or less than their original cost. ETFs carry additional risks such as not being diversified, possible trading halts, and index tracking errors.​

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.