9 High-Net-Worth Tax Strategies to Keep More of Your Money

8.5 MIN READ

Managing substantial wealth requires sophisticated high-net-worth tax strategies that go beyond basic tax preparation. As a high-net-worth individual, you face unique challenges when it comes to preserving and growing your wealth while staying compliant with the IRS regulations.

Here are nine advanced tax strategies that can help you protect your assets, minimize tax liability, and create lasting financial security for future generations.

What Is a High Net Worth Individual (HNWI)?

High-net-worth individuals represent a distinct segment of wealth management clients who possess significant liquid financial assets.

The standard threshold for HNWI classification starts at $1 million in liquid assets, excluding personal assets like primary residences and collectibles like art.

Liquid holdings typically mean cash, stocks, bonds, and other investments that you can convert into cash.

North America leads the global wealth concentration, with 7.9 million high-net-worth individuals as of 2023. Within this group, ultra-high-net-worth individuals (UHNWIs) are defined as having assets that exceed $30 million.

For high-net-worth individuals, basic tax planning methods are often inefficient and don't bring enough tax benefits.

Managing your wealth becomes more complicated as it grows because you need to pay attention to factors like:

Protecting accumulated wealth from excessive taxation
Maximizing investment returns through tax-efficient strategies
Creating sustainable wealth transfer mechanisms for future generations
Maintaining compliance with evolving tax regulations

Many high-net-worth individuals use financial professionals like tax advisors, estate planners, and investment managers for better tax savings.

9 High-Net-Worth Tax Strategies To Grow Your Wealth

1. Max Out Your 401(K)

This is a foundational strategy for reducing your income taxes.

According to the IRS, in 2025, you can contribute up to $23,500 to your 401(k).

For participants aged 50 and older, an additional catch-up contribution of $7,500 is allowed, bringing your total potential contribution to $31,000. If you're aged 60-63, you can take advantage of an enhanced catch-up contribution limit of $11,250, bumping the total contribution to $34,750.

These contributions reduce your taxable income dollar-for-dollar while growing tax-deferred until retirement.

Many high-net-worth individuals have access to executive retirement plans or deferred compensation arrangements through their employers. These plans often allow for contributions beyond standard 401(k) limits, creating additional tax-saving opportunities.

2. Make Charitable Donations

Charitable is a great tax planning strategy for wealthy families that supports meaningful causes.

Direct cash donations to qualified charities provide immediate tax deductions and reduce your taxable income.

The Tax Cuts and Jobs Act allows you to deduct charitable contributions up to 60% of your adjusted gross income for cash donations to public charities.

By contributing stocks, mutual funds, or other securities held for more than one year directly to charity, you avoid paying capital gains tax on the appreciation and receive a tax deduction for the full fair market value of the securities.

Related Article | Qualified Charitable Distributions

3. Start a Donor Advised Fund

A Donor Advised Fund (DAF) works as a charitable investment account, and it can be a great option for high-net-worth individuals looking for ongoing control over charitable donations.

When you contribute to a DAF, you receive an immediate tax deduction for the full amount, even though the actual charitable grants can happen over several years.

The contributed assets grow tax-free within the fund, potentially increasing the amount available for charitable giving.

DAFs can typically accept various types of assets beyond cash, including:

Publicly traded securities
Restricted stock
Private business interests
Real estate
Cryptocurrency

You can avoid capital gains taxes on contributed assets while claiming a deduction for their full fair market value.

4. Contribute To a Health Savings Account (HSA)

Contributions to an HSA are tax-deductible, so they reduce your taxable income.

In 2025, individuals with qualifying high-deductible health plans can contribute up to $4,300 for self-only coverage and $8,550 for family coverage.

Those 55 and older can add an extra $1,000 catch-up contribution.

The funds within an HSA grow tax-free and compound over time, creating tax savings and generating money for medical expenses in later years.

Unlike Flexible Spending Accounts, HSAs have no "use it or lose it" provision. The funds roll over indefinitely, creating a long-term medical expense reserve that can be particularly handy during retirement when healthcare costs typically increase.

5. Explore Trusts

Trusts can be a great high-net-worth tax strategy for tax management, asset protection, and wealth transfer.

There are different types of trusts that you can choose from, such as:

Irrevocable Life Insurance Trusts (ILITs): Life insurance policies structured within a trust can keep death benefits outside your estate for tax purposes and reduce estate tax liability.
Grantor Retained Annuity Trusts (GRATs): Transfer appreciating assets to your beneficiaries with minimal gift tax impact through a special trust arrangement.
Charitable Remainder Trusts (CRTs): Generate income for yourself or other beneficiaries and designate the remainder for charity.
Intentionally Defective Grantor Trusts (IDGTs): Remove assets from your estate for estate tax purposes but continue paying income taxes on trust earnings, effectively making additional tax-free gifts to your family members or other beneficiaries.
Generation-Skipping Trusts: Transfer assets to your grandchildren or later generations with minimal transfer taxes.
Spousal Lifetime Access Trusts (SLATs): Remove assets from your estate while allowing your spouse to access funds if needed.

Trusts can be complicated, so make sure to work with a qualified financial advisor and estate planning attorney to set up a trust that benefits you while adhering to tax laws.

Related Article | At What Net Worth Do I Need a Trust?

6. Start a 529 Plan

A 529 plan is an investment account for education savings that you can use to pay for qualified education expenses, including for college and K-12. These plans are sponsored by state agencies or educational institutions.

Contributions to 529 plans grow tax-free when used for qualified education expenses, including tuition, fees, books, supplies, and room and board at eligible institutions.

Federal tax deductions aren't available for 529 contributions, but many states offer income tax deductions or credits for contributions to their state-sponsored plans.

In 2025, you can contribute up to $19,000 in a single 529 plan without counting against the lifetime gift tax exemption.

Related Article | Can You Rollover a 529 Plan?

7. Municipal Bond Investments

Municipal bonds are debt securities issued by state and local governments to finance public projects, and the income you receive from them is typically exempt from federal income taxes.

For high-net-worth individuals in top marginal tax brackets, this tax-free income often creates bigger tax savings compared to taxable corporate or Treasury bonds with similar yields.

There may also be some benefits for your state and local taxes.

8. Qualified Opportunity Zone Investments

Qualified Opportunity Zones (QOZs) are designated economically distressed areas where new investments can receive preferential tax treatment. These were created by the 2017 Tax Cuts and Jobs Act to stimulate economic development.

The main tax benefit is the ability to defer taxes on capital gains.

If you sell an investment and realize a gain, you can reinvest that gain into a Qualified Opportunity Fund (QOF) within 180 days and delay paying taxes until December 31, 2026, or until you sell your QOF investment.

If you hold your QOF investment for at least 10 years, you'll pay no capital gains tax on any appreciation of that investment.

9. Tax Loss Harvesting

Tax loss harvesting is a way to save on taxes by selling investments that have dropped in value. The losses you realize can offset capital gains from other investments, directly reducing your tax liability.

The process works like this:

Identify investments in your portfolio that have decreased in value
Sell those investments to realize the losses
Use these losses to offset capital gains
Reinvest the proceeds in similar (but not identical) investments

This strategy works especially well during market downturns or when rebalancing your portfolio.

How To Pass Money to Heirs Tax-Free?

Passing wealth to the next generation without a heavy tax burden is possible, but you definitely need to plan for it.

The simplest approach is using your annual gift tax exclusion, which lets you give up to $19,000 (in 2025) to as many people as you want each year without any tax consequences. For married couples, this amount doubles to $38,000 per recipient.

For larger transfers, you can also explore options like trusts and 529 plans for educational expenses to minimize taxes. While it may not be possible to transfer your wealth completely tax-free, strategic tax planning can make a big difference in how much money you lose to the IRS.

FAQs

What Is the Tax Strategy for High Net Worth?

There's no one tax strategy for high-net-worth families, but you can minimize your tax obligations through a combination of tax-friendly investments, giving to charity, structuring your business smartly, and planning your estate. You can use accounts like 401(k)s and HSAs to reduce your taxable income and invest in municipal bonds or Qualified Opportunity Zones (QOZs).

What Is a High Net Worth Retirement Strategy?

A retirement strategy for wealthy individuals creates multiple income sources while minimizing taxes and preserving wealth. It typically includes tax-free income (from Roth accounts and municipal bonds), tax-deferred income (from traditional retirement accounts), and regular taxable investments. The main goal is to have enough income for your lifestyle while keeping taxes low as well as having a plan for how to transfer your wealth to your heirs.

What Are the Biggest Tax Loopholes for the Rich?

There aren't any "tax loopholes" for the rich, but there are high-net-worth tax strategies that you can use to lower the amount that you have to pay in taxes. For example, you can make charitable donations and start a Donor Advised Fund (DAF), save for your children's education with a 529 plan, buy municipal bonds, invest in Qualified Opportunity Zones (QOZs), or explore certain types of trusts, such as a Grantor Retained Annuity Trust or a Spousal Lifetime Access Trust.

The Bottom Line

Good tax planning for wealthy individuals means using multiple strategies that fit your specific situation and goals.

It's essential to work with a tax professional for high-income earners who can help direct you toward the best strategies and investments for you.