The year 2025 is “in the books!” Most of what could have been done to mitigate your tax liability for your next filing date has likely already happened; there are only a limited number of post-year-end options remaining. On the other hand, maintaining a tax-efficient financial strategy is a year-round endeavor, so it is certainly not too soon to begin thinking about how to save on taxes for 2026 and beyond.
Certainly, for high-net-worth families and individuals, tax-smart strategies and wealth transfer are never really on the back burner. Especially for those building a multi-generational financial legacy, it matters very much that you are maximizing the amount being legally passed on to future generations and the charitable causes you care most about, rather than sending unnecessarily large payments to the federal government.
Consider these strategies for making your financial strategy more tax-efficient for the current and future tax years.
1. Review the portfolio for tax-loss harvesting opportunities.
“Harvest season” for useful tax losses is not confined to the end of the year. Especially during periods of market volatility, opportunities may exist to strategically leverage portfolio losses and turn them into tax savings. By carefully observing the wash-sale rule, you may also be able to maintain exposure to favored market sectors (without timing the markets), benefiting from expected future gains. Tax-loss harvesting can also be helpful when it is time to rebalance your portfolio. Losses that cannot be used in a given year may be carried forward to provide offsets to portfolio gains in future years.
2. Direct assets for tax efficiency.
By incorporating your estate plan with your investment strategy, you may be able to create opportunities to pass income-generating or highly appreciated assets to beneficiaries who are in a lower tax bracket. Certain types of trusts may, with the assistance of a qualified estate planning professional, permit assets to be transferred out of your estate for the benefit of the trust beneficiary, which could be a child or grandchild. For example, grantor-retained annuity trusts (GRATs) allow you to transfer ownership of potentially appreciating assets to the beneficiary of the trust with minimal gift tax consequences while retaining an annual income from the assets for a specified term. Dynasty trusts, a type of irrevocable trust, can be useful for establishing a multigenerational platform for wealth transfer that also minimizes tax consequences for future generations. Remember, a properly designed trust can receive not only cash and listed securities, but other types of assets as well, including real estate, business interests, cryptocurrency, collectibles, and others.
3. Review your gifting strategy.
In 2026, each individual may give up to $19,000 to one or more persons without incurring gift tax liability (which means that a married couple can give up to $38,000 per individual). The lifetime annual gift exclusion remains at $15 million. High-net-worth individuals may be able to use these exclusions to transfer significant assets from their estates to beneficiaries. Careful attention to your annual gifting plan is a simple tool that can be used to limit tax liability for estate and also begin transferring assets to your chosen beneficiaries.
4. Maximize your charitable impact.
A well-developed charitable giving strategy can be a valuable way to increase impact and build a lasting philanthropic impact. This is particularly true for those trying to build philanthropic legacies. For those who itemize deductions, a donor-advised fund (DAF) can be used to “bundle” several years’ worth of donations into a single year, and the assets may then be disbursed to the donor’s preferred charitable organizations over a period of years, if desired. DAFs are also capable of accepting a variety of asset types, often making them a convenient giving vehicle for high-net-worth individuals with significant holdings in real estate and other non-cash, non-listed asset types. Persons who are taking required minimum distributions (RMDs) from IRAs and who do not necessarily need the income may wish to redirect these payments to a qualified charity by means of a qualified charitable distribution (QCD), allowing the funds to go directly to a charity and avoiding taxation as ordinary income.
Keep in mind, however, that the One Big Beautiful Bill Act (OBBBA) limits the deductible amount of charitable gifts for itemizers to amounts exceeding 0.5% of adjusted gross income (AGI) and caps the deduction at 35% for those in the 37% tax bracket.
5. Consider the timing and character of investment income.
For many individuals in higher tax brackets, focusing on tax-exempt income, such as that generated by tax-exempt bonds or tax-exempt bond funds, may offer advantages when considering the after-tax alternatives. Also, the timing of certain types of income, such as year-end capital gains distributions from certain mutual funds, has implications for the tax return. When possible, avoid purchases of such funds just before distributions are made, especially in taxable investment accounts.
JFS Wealth Advisors understands the importance of a tax-efficient financial strategy, especially for high-net-worth families and individuals. In addition to the strategies above, there may be additional tools available to make your estate (and your annual tax return) more effective, each year at tax time. If you would like to explore more options or you have other questions about important financial matters, we are here to guide you.
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