The financial industry considers high-net-worth individuals to be those with liquid assets valued at at least one million dollars. These assets can result in high taxes, especially in the state of New York which has taxes designed specifically for those with a high net worth. Implementing a smart tax plan can protect your assets and allow your wealth to continue to grow.
Consider donating stock instead of cash
Donations continue to be a favorite tax planning tool for high-net-worth individuals. Charity donations frequently allow you to receive a tax benefit. However, when you donate your stocks, you receive an additional benefit because you will not have to pay any capital gains on the stock. The charity will not have to pay any capital gains, either.
Diversify your retirement funding options
Planning for your taxes must involve considerations for your retirement. Wealth that is included in your retirement may not be subject to taxes, and the greater diversification you use in your retirement funds, the more you can save on taxes. Examples of retirement options to consider during tax planning include:
- Roth IRA
- Self-Employed 401K
- SEP IRA
- Mutual bonds
Open a 529 plan
A 529 plan helps parents save for college. These plans work similarly to an IRA by investing your contributions. Your investments grow without being taxed and can also be withdrawn tax-free as long as the funds are used to pay for college-related expenses.
Considering new investments and saving plans is the key to high-net-worth tax planning
For a tax plan to adequately protect your wealth, it will need diversification of your investments and savings. By putting your money into different accounts, you will receive a greater level of savings. Starting your tax planning sooner rather than later can also help you save money during tax time.