You’ve worked hard over the years to acquire your wealth — and it’s imperative to take measures to protect it. While making prudent investments can play a crucial role in preserving and growing your assets, it’s important not to overlook opportunities to minimize your tax exposure. There are various tax strategies that can be implemented to reduce your overall liabilities, maximize your returns, and safeguard your financial future.

Here are some of the best tax strategies for wealth preservation and growth:

Use Tax-Advantaged Accounts

Tax-advantaged accounts can lessen your tax burden by using deductions to reduce your current tax bill — allowing you to grow your assets faster. Common tax-advantaged accounts can include the following:

• Retirement accounts — Each specific type of retirement account has its own tax advantages. Traditional IRAs and 401(k)s offer tax deferred growth. Plans such as defined benefit plans offer a significant increase in tax deferrals for those who own businesses or are self employed. This means tax is not paid on any interest, dividends, and capital gains as they accumulate in the account. While Roth IRAs and Roth 401(k)s don’t offer a tax deduction on contributions made into the account, any qualified withdrawals taken out in retirement are tax-free.
• Health savings accounts (HSAs) — HSAs offer a triple tax advantage, which makes them an essential tool to preserve your wealth and grow your assets. Specifically, contributions are tax deductible, earnings are not taxed, and withdrawals taken out for qualified medical expenses are tax-free.
• 529 Plans — A 529 Plan is an account that can be used to invest in future educational expenses. Earnings in the plan are tax-deferred and withdrawals for qualified expenses are tax-free.

It’s vital to consult with an experienced tax professional who can advise you regarding the tax-advantaged accounts that would offer the most strategic tax benefits for your financial circumstances.

Establish a Trust

There are a wide range of trusts that can be used to protect your assets, reduce your tax liability, and transfer your wealth to future generations. While trusts can be a critical part of an estate plan, they can also be used to shield your assets from creditors during your lifetime and manage your wealth effectively.

Use Tax-Loss Harvesting

Tax-loss harvesting is a wealth management strategy that can help minimize your tax bill and increase your after-tax returns. Specifically, it allows you to use your investment losses to offset gains in other investments. In addition, if your capital losses exceed your capital gains, you can use up to $3,000 of those losses to offset your income. This can further reduce your overall taxable income and lower your tax burden.

Utilize Charitable Giving Strategies

Donating to a charitable organization allows you to support a cause you believe in while lowering your tax obligation. When you itemize your tax deductions, you can deduct the value of your donation to a qualified charity — and reduce your taxable income. Other charitable giving strategies to consider can include the use of charitable trusts, donor-advised funds, and qualified charitable distributions. Importantly, by donating appreciated assets such as stocks or real estate directly to your charity of choice, you can avoid paying capital gains taxes.

Choose the Right Structure for Your Business

If your wealth is generated from your business, the structure you choose can have a significant impact on wealth preservation — and reducing your tax liabilities. While LLCs and corporations can be used to protect your personal assets from business risks, there are also many tax advantages to incorporating. A diligent tax professional can help you select the right entity type based on your objectives.

Contact an Experienced Tax Professional

If you would like to implement tax strategies to preserve your wealth and grow your assets, a knowledgeable tax professional can help ensure you achieve your goals. Based in Fairfield, Connecticut, Rolleri & Sheppard CPAS, LLP offers skillful guidance and tailored solutions for complex tax planning matters. Contact us online or call (203) 259-CPAS to schedule a consultation.