The Ultimate Guide to Tax-Saving Strategies

‍Tax Efficient Portfolio Management

1. Avoid short-term capital gains: Hold onto investments for at least one year to avoid higher tax rates on "short-term" investments.
   
   External Guide: https://www.kiplinger.com/taxes/capital-gains-tax/604943/what-is-capital-gains-tax
   Video Guide: https://www.youtube.com/watch?v=4_AshGqy20Y

2. Take advantage of long-term capital gains: Uncle Sam encourages the long-term investment of capital, by offering you lower tax rates on your long-term investment income than on money you earn through your own work. Your money can earn more than you can, at lower tax rates.
   
   External Guide: https://www.kiplinger.com/taxes/capital-gains-tax/604943/what-is-capital-gains-tax

3. Investing A Roth IRA In Early Stage Growth Companies / Crypto: Use retirement accounts (legal tax shelters like Roth IRAs) to protect investments in rapid growth businesses (or assets like crypto) from substantial taxation on their potential growth when they are eventually sold.
   
   External Guide: https://www.kitces.com/blog/roth-ira-buy-early-stage-pre-ipo-company-thiel-business-shares-prohibited-transaction-disqualified-person/?fbclid=IwAR2D2XAEu1SEQFIXOGkuWJ6wo36xfak5yo6JJ-WE9U7ZYNCDrw8AapJi0Ew

4. Asset location: Tailor which investments go in which accounts based on their tax-treatment, to save on taxes while still achieving your overall asset allocation goals. Strategically place assets that generate income or capital gains (e.g., bonds that spit off coupons, stocks that spit off dividends), in tax-sheltered accounts (e.g., Roth IRAs, 401(k)s) as opposed to typical personal brokerage accounts.
   
   External Guide: https://www.kitces.com/blog/yield-split-asset-location-tax-drag-alpha-efficiency-index-funds/

5. Tax loss harvesting: Make lemonade out of lemons. Get a capital gains tax benefit from certain investments that are down temporarily by writing off some of the losses on taxes, while staying invested in "substantially identical", high quality, long-term investments. Up to $3,000 a year ($1,500 married filing separately) in net investment losses can be deducted from your regular income each year, saving $1,000-$1,500 in taxes, and unused losses can be carried over year to year.
   
   External Guide: https://www.whitecoatinvestor.com/tax-loss-harvesting/
   ‍Video Guide: https://www.youtube.com/watch?v=8jEWYL9wwhQ&feature=emb_title

6. Direct indexing: Turbo-charge your tax loss harvesting strategy by "unwrapping" ETFs and investing in the indexed securities individually. Direct indexing portfolios can take full advantage, harvesting losses in underperforming stocks even as the market as a whole is up.
   
   External Guide: https://www.kiplinger.com/investing/604846/move-over-etfs-direct-indexing-is-an-investment-strategy-worth-paying-attention-to
   ‍Video Guide: https://www.youtube.com/watch?v=71tsfOcSQ2Y

7. Crypto "wash sale" loophole: Turbo-charge your tax loss harvesting strategy. Crypto currently escapes the "wash sale" rule that applies solely to securities, so owners can take full advantage of tax harvesting rules without having to wait 30 days before re-investing.
   
   External Guide: https://www.kiplinger.com/taxes/capital-gains-tax/603753/cryptocurrency-and-the-wash-sale-rule
   ‍Video Guide: https://www.thestreet.com/personal-finance/does-wash-sale-rule-apply-cryptocurrency#gid=ci02a5740b6000247d&pid=jeffrey-levine-chief-planning-officer-buckingham-strategic-wealth

8. "Buy, Borrow, Die" / Using Loans: Fund your lifestyle by borrowing rather than selling investments that have gone up a lot, using a security-backed loan (e.g., home equity line of credit against your real estate, margin loan against your investments) to delay or reduce capital gains tax. Under a loophole in the current law, the assets get a "step-up" in cost basis when they pass on to your heirs (plain-English: it's assumed your heirs bought them at whatever the current market price will be at the time of your death, which means a massive reduction in capital gains tax for them).
   
   External Guide: https://www.wsj.com/articles/buy-borrow-die-how-rich-americans-live-off-their-paper-wealth-11625909583

9. Municipal Bonds: Use municipal bonds for your bond allocation, since these are generally exempt from federal and state taxes for residents of the issuing state. The tax benefits of this strategy can be unwound by relatively higher prices compared to other bonds (i.e., the tax "benefit" gets neutralized by a higher price) and the higher risk profile of these bonds (e.g., higher risk of a state defaulting on its bonds vs. federal government).
   
   External Guide: https://www.fool.com/investing/how-to-invest/bonds/municipal-bonds/

10. HSA contributions: An HSA is an account that comes with access to a high-deductible health plan (HDHP), and tax-optimizers use them as triple tax-free long-term savings vehicles to pay for future medical expenses. They can be rolled over year to year and they are (1) tax-deductible reducing your income tax today (2) grow tax-free, preventing you from having to pay any taxes on gains as they grow (3) get distributed tax-free, for any healthcare expenses, preventing you from having to pay any capital gains taxes. If you properly fund an HSA for 20+ years it's like eliminating the need for long-term care insurance. Great solution for folks who can't stand insurance or who like to self-fund. The "holy grail" use case for these is using an HSA to fund healthcare in your 80s and 90s when your only other source of income is an IRA. You'll avoid higher IRMAA fees, avoid higher marginal tax rates, and avoid overall tax complexity in old age.
    
    External Guide: https://www.fool.com/retirement/plans/hsa/investing/

11. 529s: For a 529 plan in 2022, you and your spouse can each contribute upt to $16,000 per beneficiary to qualify for the annual gift tax exclusion as long as the money in the 529 goes towards educational expenses. The American Opportunity Tax Credit (four years of up to $2,500 for tuition or similar expenses) and the Lifetime Learning Credit (unlimited years, up to $2,000 per year for tuition and similar expenses) are also nice.
    
    External Guide: https://www.nerdwallet.com/article/investing/529-plan-rules
    ‍Steward Blog Post: Coming Soon
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12. Ordering withdrawals in retirement: Spending the lowest net after-tax return assets first (e.g., spending Roth first and taxable brokerage accounts last). First spend anything annually taxable, then active strategies that are less tax efficient, than passive strategies that have less capital gains, then passive strategies that have higher capital gains.  
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13. Selling lowest capital gains investments first in brokerage account: Spending lowest capital gains or even tax loss investments first, before highest gains investments. Sounds counterintuitive - wouldn't you want to lock in gain? You want to sell the assets with lower expected net return first, and let highest net expected return ride. One caveat - if you have heavy concentration in a stock and want to diversify. We don't want to let the tax tail wag your investment dog!‍
    
    Income Tax
14. Get Another 401(k): If you're moonlighting or have a side gig, you could potentially get a second 401(k), because you can have a separate 401(k) for every unrelated employer, all with a $60K total potential contribution. It could look like having a 401(k) where you're an employee and you put in your “employee” contribution and your employer includes a match, and also having an individual 401(k) for your side gig, where you can contribute 20% of your profits as an “employer” contribution.
    
    External Guide: https://www.whitecoatinvestor.com/multiple-401k-rules/‍
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15. Max out your retirement contributions: The biggest tax deduction available to most high earners is to simply save for retirement in tax-deferred retirement accounts like 401(k)s and 403(b)s which allow you to save money at your currently high marginal tax rate, protect those investments from taxes and creditors as they grow, and use account withdrawals in retirement to fill the lower tax brackets.
    
    External Guide: https://www.kitces.com/blog/coordinating-contributions-multiple-employer-sponsored-defined-contribution-plans-401k-defined-benefit/‍
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16. Maximize tax-deferred & tax-exempt savings: Maximize tax-deferred and tax-exempt savings by adding income tax flexibility in retirement through tools like Roth IRAs and 401(k)s.
    
    External Guide: https://www.kiplinger.com/taxes/tax-planning/604687/are-you-maximizing-your-tax-exempt-bucket‍
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17. Dependent Care FSA: Contribute to a Dependent Care FSA through your employer to receive tax advantages for childcare expenses.
    
    External Guide: https://www.thebalance.com/guide-to-dependent-care-fsas-5206670
    ‍Steward Blog Post: https://www.oursteward.com/blog/under-the-radar-tax-break-for-working-parents‍
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18. Contribute to Roth IRAs: All the money earned in a Roth IRA, so long as it is withdrawn in retirement, is never taxed.
    
    External Guide: https://www.whitecoatinvestor.com/why-i-love-the-roth-ira-back-to-basics/‍
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19. Make Roth 401(k)/403(b)/457 contributions in your lower income years: Switch to a Roth contribution for your 401(k), 403(b), or 457 if you're in a relatively lower income year in your overall career trajectory. All the money earned in a Roth account, so long as it is withdrawn in retirement, is never taxed. This also reduces marginal tax rate risk (Uncle Sam upping tax rates in the future), and is more efficient for gifting to heirs if you have money leftover.
    
    External Guide: https://www.kiplinger.com/article/investing/t001-c000-s002-invest-in-a-roth-401k-if-you-can.html‍
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20. Utilize a Backdoor Roth IRA: A way to contribute to a Roth IRA, even if you're above the typical income limits. It's a "two-step" (1) Making an after-tax IRA contribution, and then (2) subsequently converting it to a Roth account, where it can grow sheltered from any future capital gains taxes. Note: if your 401(k) offers low-cost mutual funds, your traditional IRA can be rolled into the plan to avoid the pro-rata rule for backdoor Roth IRA conversions.
    
    External Guide: https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/
    ‍Video Guide: https://www.youtube.com/watch?v=iD-M5Bxjv00
    ‍Steward Blog Post: https://www.oursteward.com/blog/the-01-s-favorite-tax-planning-strategies-ultimate-guide-to-the-backdoor-roth-ira
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21. ‍Enable a Backdoor Roth with a Roth Conversion if you have a low IRA balance:  Typically we reserve Roth conversions for lower income years, but one exception is if you have a relatively small traditional IRA balance (<$10K). Consider a Roth conversion (bite the bullet on whatever marginal rate you have) and get that IRA balance to $0 so you can perform 20+ years of backdoor Roth contributions.
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22. ‍Enable a Backdoor Roth with a solo 401(k): You can open a Solo 401(k) if you have something on the side for which you can justify self-employment income, and then roll the IRA into your solo 401(k). Ensure you allow income IRA rollovers into your own solo 401(k)
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23. ‍Enable a Backdoor Roth with 401(k) rollover: If your IRA balance is high or you don't want to pay income tax to convert, roll to current workplace 401(k) if it accepts them. This is a runner up to solo 401(k) since will come with some fees of workplace plans.‍
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24. Mega-Backdoor Roth: The "mega" version of a Backdoor Roth IRA allows you to put even more money into a Roth IRA, but you need a 401(k) plan at work to utilize the method.
    
    External Guide: https://www.nerdwallet.com/article/investing/mega-backdoor-roths-work
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25. Deferred Compensation / 457(b) plans: Some employers offer plans that allow you to defer your compensations for years or even decades (e.g., 457(b) plans). Like a 401(k), you get to choose and control the investments, but unlike the 401(k), it is still your employer's money and subject to your employer's creditors, so caution advised.
    
    External Guide: https://www.bankrate.com/retirement/perks-of-a-government-457-retirement-plan/‍
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26. Right-size your refund: If you received a very large refund last year, check into your withholding to ensure you're not giving too big a "free loan" to Uncle Sam.
    
    External Guide: https://www.gobankingrates.com/taxes/refunds/why-getting-a-large-tax-refund-is-bad/‍
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27. Dependent Care Tax Credit: Do you pay a nanny or babysitter to take care of your kid or do you use a daycare service? If the answer's yes, then that qualifies you for a tax credit (even better than a deduction) of up to 35% of $3,000 (one kid under 12) or $6,000 (more than one kid under 12) spent on childcare.
    
    External Guide: https://www.kiplinger.com/taxes/602508/child-care-tax-credit-expanded-for-2021‍
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28. Child Tax Credit: Have kids? Then you qualify for a tax credit of $2,000 per dependent under age 17, but there are income thresholds of $400,000 for married couples and $200,000 for all other filers. Additionally, this credit might get a boost if the Build Back Better Bill passes, so stay tuned for updates.
    
    External Guide: https://www.bankrate.com/taxes/child-tax-credit-2022-what-to-know/‍
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29. Utilizing tax refunds effectively: Use your tax refund wisely by paying down credit card debt or you have the option to apply up to $5,000 of that refund to purchase Series I Savings Bonds if you file Form 8888 with your Form 1040.
    
    External Guide: https://www.kiplinger.com/personal-finance/604536/how-to-make-the-most-of-your-tax-refund-in-2022
    ‍Video Guide: https://www.youtube.com/watch?v=AJlspY8tmQ0‍
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30. Establish your tax domicile in a beneficial state: Many wealthy take steps to carefully establish their "domicile" with minimal or no taxes; places like: Puerto Rico (income tax is only 4%) and states with no income tax or state capital gains tax (e.g., Texas, Florida, Alaska, Nevada, Tennessee, Texas, Washington, South Dakota, and Wyoming as of 2020). To establish your "domicile" it will require (at least!) buying property there, shifting your family there, and setting up wills there.
    
    External Guide: https://www.kiplinger.com/article/real-estate/t007-c032-s015-financial-matters-when-moving-to-a-new-state.html‍
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31. Low-Income-Years: Tax gain harvesting—Take advantage of your natural lower income years (student, early retiree, minor) to lower future tax bills. Lower income earners don't pay taxes on long term capital gains (or qualified dividends for that matter), so taxable investing accounts can be very tax-efficient for these folks.
    
    External Guide: https://www.schwab.com/learn/story/how-to-save-money-with-tax-gain-harvesting‍
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32. Low-income years: Roth Conversions—Take the one-time tax hit, and shift your IRA or 401(k) accounts to Roth accounts where the money could grow unchecked; particularly helpful in low-income years (when in school) when you have a lower marginal tax rate.
    
    External Guide: https://www.nerdwallet.com/article/investing/roth-ira-conversion‍
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33. High-income years: Traditional 401(k) stuffing— Fill in tax-advantaged traditional 401(k) plans to the max, to take advantage of lower marginal tax bracket you'll have when you take funds out come retirement; particularly helpful in high-income years just before retirement.
    
    External Guide: https://www.nerdwallet.com/article/investing/roth-ira-conversion‍
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34. Clumping charitable contributions: Stack your itemized deductions (e.g., charitable giving) into a one year burst, to clear the threshold where an itemized tax deduction makes sense by “clumping” charitable contributions with a donor-advised fund.
    
    External Guide: https://www.kitces.com/blog/itemized-deductions-after-tcja-sustaining-intermittent-add-on-standard-deduction-threshold/
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35. ‍Tax Bracket Management: Makes most sense for higher wealth families, who are married, and pre-RMDs (before the age where Uncle Sam requires you to take withdrawals). The ideal spending plan will smooth income tax brackets over retirement to minimize your taxation over your lifetime. You're filling up those marginal tax rate buckets early retirement (no better time since likely tax rates will go up in future) and paying extra taxes early on, in return for getting to pay less taxes less in future. Filling up the 24% bucket (e.g., Roth conversion, taking social security, using this to fund spending) is the most common spot where this strategy comes into play. This is also really great toprevent a surviving spouse from getting destroyed on taxes once they file as single vs. Married Filing Jointly.
    
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    Homeowner / Real Estate
    
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36. ‍Deduct interest on mortgage: You can claim a deduction for interest on a mortgage—or mortgages—of up to $750,000, if you itemize your tax deductions.
    
    External Guide: https://www.kitces.com/blog/tcja-home-mortgage-interest-tax-deduction-for-acquisition-indebtedness-vs-home-equity-heloc/
    ‍Video Guide: https://www.youtube.com/watch?v=1RpRrYJ6ubk
    ‍Steward Blog Post: https://www.oursteward.com/blog/to-buy-or-not-to-buy-a-home#strongConsofhomeownershipstrong_56‍
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37. Deduct property taxes: You can deduct your state and local property taxes, up to $10,000, if you itemize your tax deductions.
    
    External Guide: https://www.thebalance.com/property-tax-deduction-3192847
    ‍Steward Blog Post: https://www.oursteward.com/blog/to-buy-or-not-to-buy-a-home#strongConsofhomeownershipstrong_56‍
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38. Home-sale exclusion: Sell Your House Properly. When time comes around to sell your home, if you've owned and used your your home as your main residence for at least two of the five years before a sale, you can exclude $250,000K off the gain ($500,000K for joint filers.
    
    External Guide: https://www.kiplinger.com/article/real-estate/t056-c005-s001-new-rules-on-home-sale-profits.html‍
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39. Keep track of home improvement expenses: Keep track of your home improvement expenses in the event of a home sale, because the sale price of your home minus the improvement expenses (which equals your adjusted cost basis in finance-talk) determines the taxable profit of the sale.
    
    External Guide: https://www.kiplinger.com/article/real-estate/t056-c005-s001-finding-your-home-s-tax-basis.html‍
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40. Homestead exemption: A homestead exemption (if applicable in your state) lets you protect some of the value of your home from being taxed.
    
    External Guide: https://www.thebalance.com/what-is-a-homestead-exemption-5214447‍
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41. Home office deduction: Use part of your home or apartment regularly and exclusively for your money making endeavor and you can deduct $5 for every square foot (max 300 sq ft) that qualifies for the deduction.
    
    External Guide: https://www.nerdwallet.com/article/taxes/home-office-tax-deduction‍
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42. Install renewable energy systems: The size of the tax credit varies and equals 26% of the cost of equipment and installation for renewable energy systems that were put in between 2020 and 2022, and 22% for systems installed in 2023.
    
    External Guide: https://www.forbes.com/advisor/home-improvement/solar-tax-credit-by-state/‍
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43. 1031 exchange: Avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value.
    
    External Guide: https://www.whitecoatinvestor.com/deferring-real-estate-taxes/‍
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44. Real Estate Depreciation: If you invest directly in equity real estate (or via syndications or private non-REIT funds), the depreciation of the property can eliminate the taxes on the income from the property for many years. Avoid the recapture of that depreciation by exchanging a property rather than selling it.
    
    External Guide: https://www.whitecoatinvestor.com/depreciation/

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Self-Employed / Business Owner

45. Consider a business retirement plan: Consider a retirement plan (e.g., SEP or solo 401(k)) for your business as a powerful way to reduce your taxable income and save for retirement.
    
    External Guide: https://www.nerdwallet.com/article/investing/retirement-plans-self-employed

46. Take control of your (potential) business exit: Assist in implementing income tax minimization strategies depending on the specific terms of a potential exit (cash or stock sale, holdbacks, new benefits, etc.).
    
    External Guide: https://www.kiplinger.com/business/small-business/604940/how-to-control-your-business-exit

47. Deduct business expenses: Basically, if you need it to run your business, you can deduct. This can include computers, phones and phone plans, travel costs, business (not commuting) miles, and lots of other things. If it is legit, deduct.
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    External Guide: https://www.thebalancesmb.com/deductible-business-expenses-3192959

48. Deduct work-related education as business expense: Self-employed people generally can deduct the cost of work-related education as a business expense.
    
    External Guide: https://www.kiplinger.com/slideshow/taxes/t054-s001-tax-deductions-and-credits-to-help-pay-for-college/index.html

49. Deduct car-related expenses: Any self-employed person who makes deliveries, drives to a client's location or otherwise uses a personal vehicle for work-related purposes can claim this deduction.
    
    External Guide: https://www.fool.com/the-ascent/small-business/articles/cars-tax-deduction/

50. Rent Out Your House to Your Business: Rent your house to your business for up to 14 days per year. Keep careful records on this one, but basically you're allowed to rent your house out to anyone you like, including your own business, without paying taxes on that rental income, while the cost becomes a deduction to your business. Make sure you charge a fair rate and cleaning fee to yourself.
    
    External Guide: https://www.thebottomlinecpa.com/legally-rent-home-for-tax-deductible-business-purposes/

51. Self-Employed Health Insurance Deduction: You can deduct what you pay for medical insurance for yourself and your family, whether or not you itemize and without regard to the 7.5% threshold. You don't qualify, though, if you're eligible for employer-sponsored health insurance through your job (if you have one in addition to your business) or your spouse's job.
    
    External Guide: https://www.thebalance.com/what-is-the-self-employed-health-insurance-deduction-5213734

52. Qualified business income (199A) deduction: The qualified business income deduction (a.k.a., the Section 199A deduction)—available for owners of S corporations, partnerships, LLCs and other "pass-through entities", and self-employed sole proprietors—allows you to deduct 20% of qualified business income with a 2022 income threshold of $340,100 for married couples filing jointly, $170,050 fo couples filing separately or single filers. It is limited to an amount equal to 50% of wages paid by the business.
    
    External Guide: ​​https://www.nerdwallet.com/article/taxes/qualified-business-income-deduction
    ‍Video Guide: https://www.youtube.com/watch?v=oj2SSXWKbwY

53. Deduct equipment expenses: The Section 179 deduction lets you deduct 100% of the qualifying cost of equipment in year one vs. writing it off as it depreciates over time, and for the 2022 tax year, up to $1.08 million worth of equipment is eligible for the immediate write-off of expensing (although that amount is reduced if you place more than $2.7 million of new assets into service during any single year).
    
    External Guide: https://www.thebalance.com/a-beginner-s-guide-to-section-179-deductions-5218624

54. Hire your children: If you have a non-incorporated business and you hire your minor children as employees, what you pay them is a deduction to the business. Neither the business nor your children have to pay payroll taxes like Social Security and Medicare on that income, and up to $12,200 in income can be earned before any federal income tax is due.
    
    External Guide: https://www.whitecoatinvestor.com/use-your-kids-to-lower-your-taxes/

55. Take Distributions: Split your income into salary and distributions. By forming an LLC or a corporation and making an S election, the business is taxed as an “S Corp”, and the portion of the income of the business that is determined to be a distribution is not subject to payroll taxes like Social Security and Medicare.
    
    External Guide: https://www.financialsamurai.com/whats-the-right-ratio-between-salary-and-distribution-to-save-on-taxes-and-avoid-an-audit/

56. Tax preparation deduction: Deduct costs associated with preparing returns by itemizing deductions.
    
    External Guide: https://www.thebalance.com/tax-preparation-fees-deduction-3192843

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Estate Tax

57. Utilize estate tax exemption to your advantage: Under current law, upon death married couples can pass on up to $24.12M ($12.06M per individual - 2022), without incurring gift or estate tax, and this exemption amount is set to drop back down to $10M ($5M per individual - adjusted for inflation) in 2026, so utilize the exemption while you can.
    
    External Guide: https://www.kiplinger.com/retirement/estate-planning/604534/dont-throw-away-a-1206m-estate-tax-exemption-by-accident

58. Set up "dynasty" trust: Set up a "dynasty" trust to last for multiple generations, using some or all of both the lifetime gift tax exemption and the generation-skipping tax exemption. This allows the trust to grow "tax-free" (since the income tax was paid by the wealthy individual originally setting up the trust), and estate-tax free since the trust moves the assets out of the wealthy individual's estate.
    
    External Guide: https://www.kiplinger.com/retirement/estate-planning/603546/a-smart-option-for-transferring-wealth-through-generations-the

59. Utilize intra-family loans: Use intra-family loans to move money out of your estate as long as it's treated as a bona fide (aka real) loan (e.g., using a loan to enable your children to own the property you live in, and pay them "rent" as parents)
    
    External Guide: https://www.kitces.com/blog/an-efficient-solution-to-implement-intra-family-mortgage-loan-strategies/

60. GRATs: A Grantor Retained Annuity Trust (GRAT) helps you transfer wealth to an heir while reducing tax liability by allowing the grantor to direct assets into a temporary trust and freeze the value.
    
    External Guide: https://www.nerdwallet.com/article/investing/grat

61. SLATs: A Spousal Limited Access Trust (SLAT) is similar to a GRAT but is set up by a donor spouse for the benefit of the beneficiary spouse.
    
    External Guide: https://www.whitecoatinvestor.com/spousal-lifetime-access-trust/

62. Sell to IDGTs: Establish an Intentionally Defective Grantor Trust (IDGT)—a unique trust structure where the income of the trust is still the grantor's for income tax purposes but the assets of the trust are excluded from the grantor's estate for estate tax purposes—and then sell the grantor's business to it.
    
    External Guide: https://www.kitces.com/blog/idgt-installment-sale-to-intentionally-defective-grantor-trust-rules/

63. Late GST allocations: By purposely making a late manual allocation of Generation-Skipping Transfer (GST) exemption on a GST trust (which include gifts or inheritance to "skip persons" who are at least two generations below you), you can avoid the GST transfer tax.
    
    External Guide: https://www.kiplinger.com/taxes/tax-planning/603625/generation-skipping-transfer-tax-basics

64. Create a Family Limited Partnership: Transfer assets to heirs using partnership equity each year to avoid taxation.
    
    External Guide: https://www.thebalance.com/family-limited-partnership-gifts-358121

65. Move equity shares into irrevocable trust: Moving equity shares into an irrevocable trust for heirs allows you to transfer assets without incurring any tax on the assets.
    
    External Guide: https://www.thebalance.com/what-is-an-irrevocable-trust-3505400‍

Gifting / Charitable Donations

1. Super-funding 529s: Lump 5 years worth of 529 contributions into one year without triggering gift tax, and giving your assets more time to grow tax-free. Often used by grandparents to gift.
   
   External Guide: https://www.whitecoatinvestor.com/529-superfunding/

39. Take Qualified Charitable Distributions from IRAs: To avoid income tax and excise tax on the Required Minimum Distributions (RMDs) from your IRA which you have to take when hit 70.5 years old, take out a Qualified Charitable Distribution instead and give that money to charity and avoid taxes along the way.
    
    External Guide: https://www.thebalance.com/qualified-charitable-distributions-3192883#toc-the-rules-are-different-for-roth-iras

40. Use a charitable lead trust: A charitable lead trust pays an income stream out to a qualified charitable organization for a set period of time, and when that term is up, distributes the assets to the grantor’s heirs. The tax perk is receiving a deduction for the present value of the income stream donated to charity, and avoiding gift/estate tax for transferring assets.
    
    External Guide: https://www.nerdwallet.com/article/investing/charitable-giving
    ‍Video Guide: https://www.youtube.com/watch?v=g6LOmtzdquA

41. Use a charitable remainder trust: A charitable remainder trust allows someone to transform their highly appreciated assets into an income stream that avoids capital gains tax and lessens estate tax. Upon the end of the term of the trust or when the grantor dies, the remaining money goes to charities selected by the grantor.
    
    External Guide: https://www.nerdwallet.com/article/investing/charitable-giving
    ‍Video Guide: https://www.youtube.com/watch?v=g6LOmtzdquA

42. Gifting appreciated stock vs. cash: Gifting appreciated stock (vs. cash) to charities and/or heirs from your brokerage account gets both you and the other party out of paying capital gains taxes, and you also get a Schedule A deduction for the entire value of the shares.
    
    External Guide: https://www.nerdwallet.com/article/investing/gifting-stocks

43. Donor Advised Fund: Use a donor-advised fund (DAF) to "stack" future charitable contributions into one tax year, and then receive an immediate deduction against ordinary income when itemizing. You can then direct donations from the DAF to your desired charities in future years when you claim the standard deduction, leading to huge tax savings overall.
    
    External Guide: https://www.kiplinger.com/article/taxes/t054-c001-s003-how-to-set-up-a-donor-advised-fund.html

44. Open a Roth IRA for a child: As long as your child has earned income, you can open up a Roth IRA account for them and fund it accordingly, so their money can grow tax-free!
    
    External Guide: https://www.nerdwallet.com/article/investing/why-your-kid-needs-a-roth-ira

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Ready to implement these strategies, but don’t know how to execute the plan? 

Check out our blog post on finding the best tax providers here.

We are often asked for recommendations for tax preparation (actually doing the forms) to complement the work we do with families on tax strategizing (planning in advance to lower future tax bills.) We were frustrated that no "Yelp" existed for accountants/CPAs/tax preparers, despite the fact that wealth advisors so often traded recommendations amongst themselves!  So we put together this list based on recommendations from various advisors. Check it out here.

Steward ‘s mission is opening up the 1%’s wealth strategies to America’s up-and-coming families with a combination of 21st century tech and trusted advisors. We help families determine how, where, and when to invest and save on taxes in plain-English, with minimal time and effort. Steward can help determine the best way for you to save taxes, or we can at least get the conversation started. Give it a try here.

Do you want someone to guide you and your partner through saving taxes and reaching financial freedom? Reach out to me at ami@oursteward.com or schedule a free 15 min consultation to see if we’re a good mutual fit.

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