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

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

December 04, 2023

Proactive Planning for a Stronger Strategy in the New Year and Beyond

As the New Year approaches and the hustle and bustle of the holiday season engulfs us, year-end tax planning may not be the foremost concern for high-net-worth individuals. While the temptation to postpone these considerations until January 1st or even April 15th might arise, such procrastination could result in overpaying or encountering stress about meeting deadlines. For individuals of substantial means, we’ve curated a year-end tax planning checklist of strategic actions designed to optimize tax planning before the year concludes.

Year-End Tax Checklist Step #1: Income and Deductions

For high-net-worth individuals navigating the intricate web of income sources in 2023, meticulous attention to potential deductions can be paramount. Understanding the nuances of various income and deduction forms becomes even more critical in optimizing your tax strategy. By January 31st, most of these forms will be at your disposal, offering insights into different facets of your financial landscape:

  • Form W-2: As a high-net-worth individual, income from wages, salaries, bonuses, and tips may be diverse. Scrutinizing your Form W-2 will provide a comprehensive view of this category of earnings.
  • Form 1099-DIV: For those with extensive investment portfolios, Form 1099-DIV becomes crucial. It details dividends and investment distributions, enabling you to leverage investment-related deductions effectively.
  • Form 1099-R: High-net-worth individuals often have diverse retirement accounts, including annuities, profit-sharing plans, IRAs, insurance contracts, and pensions. Form 1099-R sheds light on distributions from these accounts, aiding in strategic retirement planning.
  • Form 1099-INT: Interest income from various financial instruments impacts high-net-worth individuals differently. Form 1099-INT highlights interest income paid, a key consideration for optimizing tax efficiency.
  • Form 1099-MISC: Miscellaneous income, such as rent, prizes, and awards, may feature prominently for high-net-worth individuals. Monitoring Form 1099-MISC is essential, especially if royalties or miscellaneous income exceeded certain thresholds.
  • Form 1099-NEC: Independent contractors, freelancers, sole proprietors, and self-employed individuals in the high-net-worth bracket should pay attention to Form 1099-NEC. It provides insights into payments exceeding $600 from businesses, ensuring comprehensive reporting.
  • Form 1095-A: Health Insurance Marketplace coverage considerations become more intricate for high-net-worth individuals. Form 1095-A from a Health Insurance Marketplace carrier elucidates coverage details and potential eligibility for subsidized coverage or tax credits.
  • Form 1098: Property-related deductions are common for high-net-worth individuals. Form 1098, outlining mortgage interest or property taxes paid, assists in optimizing deductions for those who itemize.
  • Form 1098-T: Educational expenses for high-net-worth individuals may extend beyond the ordinary. Form 1098-T captures qualified educational expenses, offering opportunities for education tax credits.
  • Form 1098-E: Student loan interest considerations are relevant even for high-net-worth individuals. Form 1098-E, for those who paid more than $600 in student loan interest, provides an above-the-line tax deduction.

Year-End Tax Checklist Step #2: Investments

For high-net-worth individuals with significant investment portfolios, the impact on tax liability is multifaceted. Here are several insights to consider:

Tax-Loss Harvesting

Unlock the potential for significant tax savings by strategically addressing unrealized losses in your taxable investment accounts through tax-loss harvesting. Capital losses exceeding gains can offset taxes on capital gains and even reduce ordinary income by up to $3,000. This nuanced strategy can result in substantial savings for discerning investors.

Net Investment Income Tax

High-net-worth individuals may face an additional 8% tax on net investment income if their modified adjusted gross income surpasses $200,000 (for single taxpayers) or $250,000 (for married taxpayers). Strategically deferring investment income to other years can help mitigate this additional tax burden.

Rebalance Your Portfolio

As a high-net-worth investor, aligning asset allocations with your investment objectives is paramount. Regularly reassess and rebalance your portfolio, especially if a concentrated equity position poses unnecessary risks. Diversification is key—avoid having all your financial assets concentrated in one area to help ensure a well-rounded and resilient portfolio.

Stock Options and AMT

Certain investments, such as incentive stock options, can influence your alternative minimum tax (AMT) liability. A thorough review of these considerations can be crucial to avoid surprises during tax season. Engage with a qualified financial professional who can provide detailed insights and address any questions you may have on this intricate topic.

Year-End Tax Checklist Step #3: Retirement

For high-net-worth individuals strategizing their financial future, a retirement plan not only serves as a crucial savings tool but also plays a pivotal role in tax optimization. As the New Year looms, consider these tailored steps:

Maximize Retirement Contributions

If you’re enrolled in an employer-sponsored retirement plan like a 401(k), 403(b), or 457 plan, maximizing contributions can be a tax-saving endeavor. Contributions are pre-tax, directly reducing your taxable income. Seize the opportunity to contribute up to $22,500, with an additional $7,500 catch-up allowance for those over 50. It’s essential to complete contributions before December 31st for the current tax year.

Consider a Roth Conversion

While there are income limits on Roth IRAs, conversions are not subject to income restrictions. So, for high-net-worth individuals, strategic conversion of pre-tax funds to a Roth account is a tax-efficient move. Timing is crucial, as the converted funds become taxable in the year of conversion. Once converted, enjoy tax-free growth with no mandatory distributions, providing flexibility and potential tax advantages.

Take Your Required Minimum Distributions (RMDs)

Upon reaching age 72, RMDs become mandatory for all qualified retirement accounts (excluding Roth IRAs). The first distribution deadline is April 1st of the year following the year you turn 72, with subsequent RMDs due by December 31st each year. Vigilance is key, as failure to withdraw the full amount by the due date incurs a 50% excise tax on the undistributed amount.

Year-End Tax Checklist Step #4: Charitable Giving

Giving back to organizations and causes that are meaningful to you offers a two-fold benefit: you get to make a difference while also enjoying financial advantages. Here are a few things to consider regarding your philanthropy:

  • Gifting Appreciated Assets: Maximize charitable impact and minimize tax liability by donating appreciated assets held for over a year. Directly donating these assets to a charity can typically avoid capital gains tax, offering a tax-efficient giving strategy.
  • Bunching Donations: Optimize deductions by ‘bunching’ multiple years of charitable donations into one tax year. Especially beneficial if current deductions fall below the standard threshold, this strategy consolidates donations for two years into a single year for maximum itemized deductions.
  • Taking a Qualified Charitable Distribution (QCD): Reduce tax liability by considering a QCD if you have an RMD you won’t need for expenses. Donate up to $100,000 from an IRA to a 501(c)(3) organization, counting towards your RMD without being considered taxable income.
  • Consider Using a Donor Advised Fund: Establish a donor-advised fund (DAF) for tax-efficient giving. Make a charitable contribution, receive a tax deduction, and recommend grants from the fund to chosen charities over time.

Are You Ready for Your Year-End Tax Planning?

Crafting a tax-efficient strategy involves more than ticking off a checklist. Remember, this list isn’t exhaustive and should be assessed within the broader scope of your financial plan. If you have questions about the mentioned considerations or seek a second opinion on your current plan, Aviance Capital Partners is ready to assist. If you’ve been looking for a Florida financial advisor, contact us today!


Aviance Capital Partners, LLC (“ACP”) is an SEC registered investment adviser located in Naples, Florida. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that ACP has attained a certain level of skill, training, or ability. While the information presented is believed to be factual and up-to-date, ACP does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of ACP as of the date of publication and are subject to change. Not all services will be appropriate or necessary for all clients, and the potential value and benefit of the ACP’s services will vary based upon the client’s individual investment, financial, and tax circumstances. The effectiveness and potential success of a tax strategy, investment strategy, and financial plan depends on a variety of factors, including but not limited to the manner and timing of implementation, coordination with the client and the client’s other engaged professionals, and market conditions. This should not be construed as specific investment, financial planning or tax advice tailored to an individual reader. ACP suggests that readers consult a financial professional, attorney or tax advisory professional about their specific financial, legal or tax situation. Past performance does not guarantee future results. All investment strategies have the potential for profit or loss, and different investments and types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment or investment strategy, including those undertaken or recommended by ACP, will be profitable or equal any historical performance level. Additional information about ACP, including its Form ADV Part 2A describing its services, fees, and applicable conflicts of interest and its Form CRS is available upon request and at https://adviserinfo.sec.gov/firm/summary/146597. 

For current ACP clients, please advise us promptly in writing, if there are ever any changes in your financial situation or investment objectives, if you wish to impose any reasonable restrictions to our management of your account, or if you have not been receiving at least quarterly account statements from your account custodian.