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  • Writer's pictureJosh Dandurand

Thinking Ahead: Tax Planning Strategies for High Earners

Updated: Feb 21

Evidence based investing

Many tax planning opportunities have passed for 2023, but now is a great time to look ahead and prepare for 2024. Here, we outline key strategies that may improve your financial well-being and tax efficiency in the year to come.


1. Maximize Retirement Account Contributions


We’ll start with the low hanging fruit. One of the most effective ways to reduce taxable income is by maximizing contributions to retirement accounts such as 401(k)s and IRAs. Every dollar you contribute is a dollar you don’t pay taxes on now. For 2024, the 401k and IRA contribution limits are $23,000 and $7,000, respectively. Consider setting up automatic contributions to put your savings on cruise control.


Pro tip: If you're 50 or older, don't forget the catch-up contributions that allow for even greater pre-tax savings; an additional $7,500 for 401k and $1,000 for IRA’s.


2. Utilize Health Savings Accounts (HSAs)


HSA's offers a triple tax advantage: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Planning to maximize your HSA contributions can not only prepare you for future healthcare costs but also lower your taxable income.


Pro tip: Withdraws made after age 65 can be used for non-medical expenses without penalty but will be subject to ordinary income taxes.


3. Implement Tax-Loss Harvesting


Tax-loss harvesting, or the strategy of selling investments at a loss to offset capital gains and/or income, requires timely execution. By monitoring your investment portfolio throughout the year, you can identify opportunities to implement this strategy effectively, ensuring that you're not caught off guard by year-end market fluctuations.


Pro tip: Remember to adhere to the wash-sale rule to ensure your actions are tax-compliant.


4. Strategic Charitable Contributions


Looking forward, consider how charitable contributions can impact your taxable income. For those who are philanthropically inclined, planning donations or setting up a Donor-Advised Fund (DAF) can be a tax-efficient way to support the causes you care about.


Pro tip: Donating appreciated stocks or assets provides dual benefits: avoiding capital gains taxes on those investments and receiving a deduction for their full market value.


5. Explore Income Shifting Opportunities


For business owners or individuals with flexible income sources, income shifting can be a viable strategy. By (legally) distributing income among family members in lower tax brackets or through business entities, you may reduce your overall tax burden. Early planning is essential to ensure these arrangements are both effective and compliant with IRS regulations.


Pro tip: You will want to consult a tax professional when exploring income shifting opportunities.


6. Engage with a Wealth Advisor


The complexity of tax planning for high earners highlights the importance of professional guidance. A wealth advisor can provide you with tailored advice that not only addresses tax minimization for the upcoming year but also integrates with your long-term financial goals. An advisor can keep you informed about legislative changes that may affect your tax situation and help you navigate the planning process.


Pro tip: Most Wealth Advisors aren’t tax professionals, but given their holistic viewpoint of one’s financial picture, offer a valuable perspective of how to incorporate tax planning strategies into one’s financial plan.


In summary, it’s never too early to start thinking ahead. Small adjustments now may lead to big outcomes in the future. This tax season is a great time to identify missed opportunities, adopt a forward-looking approach and implement strategies to significantly improve your tax efficiency and overall financial wellbeing for next year.


Proactive planning, coupled with expert advice, is the cornerstone of a robust tax planning strategy that supports your wealth-building journey.


Please reach out if you’d like a free tax report to identify opportunities for 2024!

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Dandurand Financial Partners, LLC d.b.a Walden Financial is a registered investment advisor offering advisory services in the State of Ohio and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training. The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site. The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Dandurand Financial Partners, LLC d.b.a Walden Financial disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose. Walden Financial does not warrant that the information on this site will be free from error. Your use of the information is at your sole risk. Under no circumstances shall Walden Financial be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the information provided on this site, even if Walden Financial or a Walden Financial authorized representative has been advised of the possibility of such damages. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.

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