Tax codes and rules change frequently. In fact, many of the tax-saving benefits introduced by the Tax Cuts and Jobs Act (TCJA) are scheduled to expire at the end of 2025. It’s never too early – or too late – to take steps to minimize your income tax burden. Utilizing tax planning strategies throughout the year is your best weapon against paying more than your share of taxes when April 15 rolls around.
While many people are aware of common income tax reduction strategies—such as making qualified plan contributions, deducting eligible medical expenses (those exceeding 7.5% of your adjusted gross income, or AGI), or funding an FSA or HSA—there are lesser-known approaches that may benefit high-income earners.
Below are five effective tax mitigation strategies designed to help high-income earners maximize savings and reduce their tax burden.
- Donor Advised Funds (DAFs): Contribute to a DAF for an immediate tax deduction and recommend charitable grants over time.
- Tax-loss Harvesting: Sell underperforming investments to offset capital gains and reduce your tax liability.
- 1031 Exchanges: Reinvest proceeds from a property sale into another like-kind property to defer capital gains taxes.
- Section 179: This tax deduction allows business owners to write off the full cost of qualifying equipment or software purchases in the year they’re placed in service, offering immediate business tax savings.
- Charitable Remainder Trust (CRT): Create a CRT to reduce estate and income taxes while providing income and supporting a charity.
Download our white paper for a deeper look at these five tax-planning strategies tailored for high-net-worth and high-earning individuals.