High-net-worth tax strategies for 2025: deductions, asset location, philanthropy, and more.
For high-net-worth individuals, minimizing tax burden is an ongoing—and evolving—challenge. The landscape in 2025 includes major changes in estate tax exemptions, increased IRS scrutiny, and enhanced importance of asset location. Start by mapping your entire financial picture: incomes, investments, business interests, trusts, and planned gifts. Identify strategies that match your family’s needs and charitable intents for the greatest total impact. Begin with retirement accounts: maximize contributions to 401(k)s, IRAs, and HSAs to tap current tax deductions or future tax-free growth. Roth conversions should be evaluated annually, especially in low-income years or ahead of projected tax hikes.
For taxable accounts, systematic tax-loss harvesting and managing holding periods can trim short- and long-term capital gains, while passive investment strategies further minimize turnover and capital gain exposure. Philanthropic gifts can support favored causes while providing immediate or future tax benefits. Always synchronize your philanthropic approach with your estate and wealth transfer plans to maximize both impact and efficiency.
Strategically locating your assets is a core principle of tax planning for high-net-worth individuals. Different investment vehicles—taxable brokerage accounts, IRAs, Roth accounts, trusts—have unique tax implications. For maximum efficiency, taxable bonds and high-yield investments often belong in tax-deferred or tax-free accounts, while stocks and other growth assets can be held in taxable accounts to take advantage of lower capital gains rates and the step-up in basis at death.
This is also why rebalancing, harvesting tax losses, and thoughtful use of appreciated assets for gifts or donations are critical components of a well-crafted plan. Estate planning is integral to holistic tax minimization. Using annual exclusion gifting, spousal lifetime access trusts (SLATs), grantor retained annuity trusts (GRATs), and irrevocable life insurance trusts (ILITs) can help move appreciating assets out of the taxable estate. Each structure offers differing levels of control and complexity, so aligning your tools with long-term family and philanthropic goals is essential. Estate plans should be reviewed annually, especially in anticipation of changing exemption limits or new legislation.
Charitable giving is a powerful tool for reducing tax liability, and HNWIs have specialized vehicles at their disposal. Donor-advised funds (DAFs), private foundations, and charitable remainder or lead trusts can all convert appreciated assets into impactful gifts while generating immediate or deferred tax deductions. Bundling charitable contributions—"bunching" deductions into a single tax year—can help itemizers clear the new standard deduction thresholds and realize maximum benefit.
Gifting strategies may also involve direct gifts to family (within annual exclusion limits), 529 plans for education, or qualified charitable distributions from IRAs. Consider the full picture when making charitable gifts: gifting highly appreciated, low-basis assets can reduce exposure to capital gains and estate tax, while trusts and DAFs offer strategic legacy planning. Work closely with advisors to time your actions, document transactions, and keep pace with federal and state law. Visit Thayer Partners home for a personalized strategy review.