One of the most important decisions that you’ll make in your lifetime is how much money to save and invest. If you’re a high-net-worth individual (HWI), then this means that you must carefully consider every possible way that you can save money on taxes.
The tax code is full of opportunities to lower your tax bill, but it can be difficult to know which ones are worth pursuing. We understand that there are many different strategies for saving money on taxes—and we’d love to help you take advantage of them with our tax planning services.
But first, let’s talk about why HWI should care about saving money on taxes.
Why Do High Networth Individuals Need a Smart Tax Strategy?
When it comes to taxes, high net worth individuals face a unique set of challenges. While you might be able to find a solution for your regular taxes, you’re going to need some specialized help when it comes to taking care of your high-net-worth taxes.
There are two main things that make a high-net-worth tax strategy unique: the complexity of the returns, and the broad range of tax issues that may arise. The complexity of the return means that it’s not just about filling out forms; there are many different ways in which an accountant can help you take advantage of deductions and credits that can save you money. The broad range of issues means that many high-net-worth individuals have complicated financial lives—they have properties around the world, they own businesses, they have multiple sources of income—and all of these things must be taken into account when preparing their taxes.
In short, if you’re a high-net-worth individual and want to make sure that you’re paying as little in taxes as possible (while still following all applicable laws), then having someone who specializes in this area is critical for ensuring your success.
Plan Your Tax Strategy for Investments
Investments are a great way to grow your wealth, especially if your investment portfolio is diverse. That being said, there are tax implications that should be considered before selling off investments that would be taxed as capital gains.
Short-term capital gains are taxed as regular income which is typically a higher rate than you would be taxed for any long-term capital gains. On the other hand, long-term capital gains are taxed at a rate of 0%, 15%, and 20% depending on your tax bracket.
Meet with an experienced tax strategist to prepare for how your investment strategy will impact your taxes to avoid paying more in taxes than you need to.
Additionally, if you’ve sold stocks that have appreciated in value, you may be able to take advantage of this opportunity to save on your taxes by using the proceeds from your sale to buy more shares of the same company at a lower price.
Create a Trust for Transferring Inheritance
Another way high-net-worth individuals can save money on their taxes is by creating a trust. This allows them to avoid paying high inheritance taxes when they pass on their wealth—in other words, they don’t have to pay up when they leave their estate behind!
Consider Charitable Donations
First, it is important to understand the rules surrounding charitable deductions. The IRS has very specific guidelines for what constitutes a deductible donation. In order for your donation to be eligible for a deduction, it must be made to an organization that qualifies under section 501(c)(3) of the Internal Revenue Code. This includes religious organizations, educational institutions, hospitals and medical research organizations. You must also be able to prove that you made an actual cash contribution; if you donated goods or services instead of cash, then you will not be able to claim a deduction for those items. The value of any time or services you donate must also be calculated into the total amount of your deduction in order for it to be considered valid.
Look into Individual Pension Plans (IPPs)
In addition to being able to claim charitable donations on your taxes as an individual who meets certain requirements, there are also other strategies available if you want to reduce your tax burden while simultaneously growing your savings over time through an Individual Pension Plan (IPP). IPPs allow individuals with high incomes who meet certain
Invest in a Smart Tax Strategy with Pro Vision Wealth
In conclusion, there are many things that high-net-worth individuals can do to save money on taxes. Before they make financial plans, they should plan their tax strategies as well. They need to be sure to plan everything together because different things can have a big effect on each other. A lot of work goes into this, but it is so worth it when the time comes to sit back, relax and enjoy the fruits of your labor! Plan your tax strategy with the experts at Pro Vision Wealth. We employ the top tax and wealth planning professionals and we can apply that wealth of knowledge to your wealth planning.