Year-End Tax Planning: A Checklist for High-Net-Worth Individuals

Tips to Set Yourself up for a Tax-Efficient 2024

Uncover year-end tax planning strategies for high-net-worth individuals and secure your financial future.

As the year draws to a close, it’s a good time to turn your attention to year-end tax planning. This can be especially important for high-net-worth individuals because a well-thought-out tax strategy can help you minimize your tax liability – sometimes significantly – and make the most of your resources for the coming year and beyond. Below, we’ll provide you with a comprehensive year-end tax planning checklist to ensure that you start the next year on a fiscally sound note.

Year-End Tax Planning Step #1: Review Your Investment Portfolio

The first step in your year-end tax planning is to review your investment portfolio. Evaluate your holdings and consider whether you need to rebalance your assets. Selling underperforming investments can help offset capital gains and reduce your overall tax liability. Additionally, consider tax-efficient investment strategies, such as tax-loss harvesting, to make the most of your investments.

Year-End Tax Planning Step #2: Maximize Retirement Contributions

High-net-worth individuals often have access to various retirement accounts, such as 401(k)s, IRAs, or SEP-IRAs. If this is the case for you, make sure to maximize your contributions to these accounts as they offer valuable tax benefits. Contributions to traditional retirement accounts can reduce your taxable income, while Roth contributions will provide tax-free withdrawals later on in retirement.

Year-End Tax Planning Step #3: Donate to Charities

Charitable giving is not only a feel-good endeavor but also an effective tax planning strategy because donating to certain qualified charities can lead to tax deductions. Consider setting up a donor-advised fund for a lump-sum charitable contribution, or donate appreciated assets like stocks, which can help you avoid capital gains taxes.

If you are over 70½ years old, you can also make tax-efficient charitable distributions directly from your Individual Retirement Account (IRA). These Qualified Charitable Distributions (QCDs) can satisfy your Required Minimum Distributions (RMDs), reduce your taxable income, and provide the opportunity to support charitable causes close to your heart.

SEE ALSO: Are You Practicing Values-Based Financial Planning?

Year-End Tax Planning Step #4: Explore Alternative Gifting Strategies

If you’re looking to reduce your taxable estate, you can give annual gifts up to a certain limit to your heirs, free from gift tax. Additionally, you may want to consider making use of your lifetime gift tax exclusion, which is quite substantial for high-net-worth individuals. This can get complicated so consult with a financial advisor to devise a gifting strategy that suits your financial situation.

Year-End Tax Planning Step #5: Revisit Your Estate Plans

Estate planning is a crucial aspect of year-end tax planning for anyone, but especially for high-net-worth individuals. As the year comes to a close, take some time to review your estate plan to ensure it still aligns with your current goals and the latest tax laws. This may involve setting up trusts, revising wills, and updating beneficiaries to maximize tax efficiency and protect your wealth for future generations.

Year-End Tax Planning Step #6:  Take Advantage of Any Tax Credits

Tax laws change all the time, yet there are usually multiple credits taxpayers qualify for. You might be eligible for tax credits such as the Child Tax Credit, Education Credits, and the Residential Energy Efficiency Credit. Ensure you are aware of all options that apply to your situation and take full advantage of them.

Year-End Tax Planning Step #7: Review Your Business Structure

If you own a business, the structure of your business can have a significant impact on your tax liability. So, you may want to consider reviewing your business structure to ensure it is as tax-efficient as possible. Consult with a tax advisor to determine if a change in structure is warranted.

SEE ALSO: Portfolio with a Purpose: The Benefits of ESG Investing

Year-End Tax Planning Step #8: Consult with a Tax Professional

Year-end tax planning is complex for everyone but for high-net-worth individuals, it can be downright overwhelming – especially when you consider the ways tax laws can change from year to year. To ensure you are making the best decisions for your financial future, it’s highly recommended to consult with a team of tax professionals. Enlist the help of CPAs, financial advisors, and estate planning attorneys to develop a comprehensive strategy that aligns with your unique circumstances.

Get Ahead on Your Year-End Tax Planning and Set Yourself Up for a Financially Strong 2024

For high-net-worth individuals looking to make the most of their financial resources and minimize their tax liability, smart year-end tax planning becomes critical. By following this checklist, you can ensure that you are well-prepared to navigate the complexities of the tax code and make informed decisions that benefit your long-term financial goals. Don’t wait until the last minute – start your tax planning today and embark on the new year with confidence and financial security.

If you’d like to optimize your finances with a strong year-end tax planning strategy, consider giving us a call today. At Flourish Wealth Management, our team of advisers is committed to helping you secure your financial future with expert guidance and tailored strategies. We look forward to hearing from you!

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