Ten Essential Tips for Filing Your Taxes
Charleston, SC - March 17th, 2025
Author: Andrew Mescon
Chief Executive Officer
I am a big believer in the adage, “It’s not what you make, it’s what you keep.” Managing wealth isn’t just about making the right investment decisions—it’s also about maximizing tax efficiency.
When it comes to filing taxes, ensuring you’re well-prepared can mean the difference between significant savings and costly mistakes. Whether you’re filing as an individual or through your business entity, here are 10 tax tips to keep in mind whether you are filing taxes for this year, or in the years ahead.
Understand Your Investment Income Tax Implications
Accredited investors often have diverse portfolios, including stocks, real estate, private equity, hedge funds, and venture capital investments. Different types of investment income—capital gains, dividends, interest, and rental income—are taxed at different rates. Understanding how each is classified will help you plan accordingly for strategies to reduce your tax burden.
Take Advantage of Capital Gains Strategies
Long-term capital gains (on assets held for more than a year) are generally taxed at lower rates than short-term capital gains. If you have appreciated assets that you are considering selling but have held them for less than a year, consider holding them a little longer to qualify for the reduced long-term tax rate. Additionally, tax-loss harvesting—selling underperforming investments to offset gains—can also help reduce your overall tax liability.
Maximize Tax-Advantaged Accounts
No matter what your investment portfolio looks like, tax-advantaged accounts remain powerful tools. Max out contributions to retirement accounts like IRAs and 401(k)s and consider Health Savings Accounts (HSAs) if you qualify. If you own a business, a SEP IRA or Solo 401(k) could provide additional opportunities to defer income tax.
Leverage Opportunity Zones and 1031 Exchanges
Investing in Qualified Opportunity Zones (QOZs) can defer and potentially reduce capital gains tax obligations. Similarly, if you're involved in real estate investments, a 1031 exchange allows you to defer capital gains taxes by reinvesting proceeds into a like-kind property. These strategies require meticulous compliance, so make sure you work closely with your financial, tax, and legal team before trying to execute.
Be Mindful of Passive Income and Loss Rules
Many accredited investors participate in private placements, real estate, and alternative investments that generate passive income. However, the IRS limits deductions on passive losses unless you have passive income to offset them (or qualify as a real estate professional). Understanding these rules ensures you don’t inadvertently leave deductions on the table.
Plan for the Net Investment Income Tax (NIIT)
The Net Investment Income Tax (NIIT) imposes an additional 3.8% tax on investment income for individuals, estates and trusts, if modified adjusted gross income (MAGI) exceeds certain thresholds (e.g., $200,000 for single filers and $250,000 for married couples filing jointly). If you’re close to the threshold, there are options to lower your MAGI, like deferring income, increasing retirement contributions, making charitable donations, etc.
Utilize Charitable Giving for Tax Benefits
Charitable contributions can be an effective tax-saving strategy while also aligning with your philanthropic goals. Donor-Advised Funds (DAFs) allow you to donate appreciated assets without incurring capital gains taxes and provide immediate tax deductions. Charitable remainder trusts (CRTs) can also provide ongoing tax advantages while benefiting causes you support.
Keep Track of K-1s and Other Complex Tax Documents
Investments in partnerships, hedge funds, and private equity typically issue Schedule K-1 forms, which report income, deductions, and credits. These forms often arrive late in tax season, sometimes necessitating a tax extension. Stay proactive in tracking K-1s and consider working with an accountant to file any needed tax filing extensions or alternatively to help anticipate potential tax liabilities before receiving the final documents.
Review State and Local Tax Considerations
State and local tax (SALT) implications can significantly impact your overall tax liability, particularly if you invest in multiple jurisdictions, which is quite often the case when you invest in real estate funds. Some states have high capital gains taxes, while others (like Florida or Texas) impose no state income tax. If you’re considering relocating or restructuring investments, factor in these local tax differences.
Work with a Tax Professional Who Specializes in High-Net-Worth Investors
Given the potential complexities involved in filing taxes, partnering with a CPA or tax advisor specializing in high-net-worth individuals is invaluable. They can help you navigate tax law changes, identify deductions you might overlook, and ensure compliance with all relevant regulations. Additionally, a tax strategist can help you implement proactive planning throughout the year rather than just at tax time, which ultimately helps you reduce or defer your tax liability.
Final Thoughts
Tax season doesn’t have to be stressful—strategic planning can turn it into an opportunity to enhance your financial standing. By staying proactive, leveraging tax-advantaged strategies, and working with professionals, accredited investors can optimize their tax positions and keep more of their hard-earned wealth. Don’t wait until the filing deadline—start reviewing your tax strategy today to maximize savings and minimize liabilities.
Ballast Rock Private Wealth does not provide tax advice. The information above should be used for informational purposes only and should not be interpreted as direct tax advice. It should not be solely relied upon for making tax, legal, or accounting decisions. Please consult your own CPA/tax advisor before making any transaction or decision.
