Tax Planning Strategies for High-Net-Worth Individuals

Written By:
Zachary J. Montgomery
Published On: 
March 1, 2023

Being a high-net-worth individual means that you have accumulated a significant amount of wealth, but it also likely means that your taxes have more complexity. Tax planning is an important part of any financial plan and can help you reduce your tax liability and maximize the efficiency of your investments. Here, we will look at seven essential tax planning strategies that all high-net-worth individuals should consider.

  1. Use Tax-Advantaged Accounts. One of the most effective ways to manage your taxes is to make use of tax-advantaged accounts, such as: HSA accounts, 401(k)s, and IRAs. These accounts allow you to save money on a pre-tax basis, so you’re not taxed on the contributions or earnings until the time comes to withdraw them. The earlier you start making contributions, the more time they have to compound and grow without being taxed. Conversely, during times of historically low tax rates, it may also make sense to utilize Roth IRAs—paying less taxes now rather than more taxes later.
  2. Utilize Charitable Giving. Donating to charity can be a great way to reduce your taxable income while also doing something good for others in need. Consider setting up a donor advised fund or charitable trust which allows you to deduct the full amount of your contribution in the year it was made while still allowing you to spread out the donations over multiple years. You should also be aware of certain limitations on charitable giving.
  3. Invest in Real Estate. Real estate investments can provide numerous tax benefits including certain deductions (property taxes, depreciation, etc.). Moreover, if you hold your investments for a sufficient amount of time (i.e., more than one year), your gains will be subject to capital gains rates. Talk with our financial and tax professionals about how best to structure your investments and diversify your portfolio.
  4. Take Advantage of Tax Credits. There are many different types of credits available that can help lower your overall federal tax liability. These include, among others, credits for education expenses or energy-efficient home improvements. Be sure to discuss with your advisors which credits apply to your situation and make sure that you’re taking full advantage of them when filing your taxes each year.
  5. Establish a Retirement Plan. Establishing a retirement plan can be an excellent way to reduce current taxes while setting yourself up for long term financial security in retirement years down the road. Contributions made into these plans are deductible from gross income at the federal level, so they provide an immediate tax benefit as well as future growth potential. Again, if you have a preexisting IRA, it is also important to discuss current strategies with your advisor (e.g., backdoor Roth conversions).
  6. Utilize Trusts. Trusts are legal entities designed for asset protection and estate planning purposes that also offer tax advantages depending on how they’re structured and managed. When creating trusts, various decisions must be made with the trust’s structure, including: who will be granted control over assets, who will benefit from those assets (now and upon death), when distributions will occur, etc. You should discuss your trust(s) with your advisors to ensure they are incorporated in your overall financial strategy.
  7. Stay Updated on Tax Changes. Federal tax changes are always on the horizon. It's critical to stay informed about changes that can affect your tax liability and your bottom line. Implementing tax planning and strategies with informed advisors is essential to helping you reach your financial goals.


Properly managing your taxes can be complicated, but it is incredibly important if you want to maximize the efficiency of your investments and minimize what you owe come April 15th (or April 18th) each year. Understanding how various strategies can help reduce your liability is key, but having access to experienced professionals who specialize in taxation matters is equally important. Take advantage of all available opportunities and talk with the advisors at Provident Financial Planning.

Make an appointment for a free consultation to speak with the Provident Financial Planning team of Certified Financial Planner™ and CPA/JD tax experts, so we can advise you on how to implement an investment and tax strategy that is tailored to you.

Schedule an appointment.

In His Name,

Zachary J. Montgomery, JD, CPA, CFE

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Written By:
Zachary J. Montgomery
Published On: 
March 1, 2023
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