The tax climate for high earners remains one of the most favorable in decades. Many provisions from the 2017 Tax Cuts and Jobs Act—such as reduced income tax rates, a higher standard deduction, and historically high estate and gift tax exemptions—are now permanent thanks to the One Big Beautiful Bill Act, signed on July 4, 2025. Starting in 2026, the estate and gift tax exemptions will be fixed at $15 million per individual ($30 million per married couple) and indexed for inflation. The State and Local Tax (SALT) deduction cap has been temporarily raised to $40,000 for taxpayers earning under $500,000 annually, a benefit that lasts until 2029. While these changes bring long-term stability for wealthy households, careful planning remains essential to maximize benefits and avoid IRS challenges.
This technique lets investors tap the value of appreciated stock without immediately triggering capital gains tax. A typical approach involves borrowing against the shares from an investment bank, using them as collateral, and then locking in their value by buying and selling offsetting options to protect against price drops. The borrowed funds can be invested or spent, while taxes are deferred until the loan is repaid or the shares are transferred to the lender. Although still legal, the IRS has intensified its scrutiny of such arrangements following high-profile court cases, making it critical to structure the deal carefully and maintain thorough documentation.
Owners of valuable real estate can extract large sums without selling and paying immediate capital gains tax by restructuring ownership through partnerships and loans. For example, if two partners own a $100 million building and one wants to exit, the partnership can borrow against the property, route the proceeds through layered entities, and issue a note to the departing partner in place of the property. When the note is repaid, the partner has effectively cashed out tax-deferred. With today’s higher estate tax exemptions, this method can also serve as a long-term wealth transfer tool, though changes in property valuation rules or debt treatment could impact future use.
Wealthy families still use vehicles like Grantor Retained Annuity Trusts (GRATs) and intentionally defective grantor trusts to move future asset appreciation out of their estates. A GRAT allows the donor to recover their contribution plus interest over a fixed term, with any excess growth passing to heirs free of estate and gift taxes. In an intentionally defective grantor trust, a discounted sale of assets to the trust—often financed with a note—lets the trust capture future gains while the original owner pays income taxes on the trust’s behalf. With the estate exemption now permanent and indexed for inflation, these strategies remain powerful, though the urgency to act before potential law changes has lessened.
Executives continue to prefer stock options over outright share grants for their ability to defer taxation until exercise. Nonqualified stock options, the most common type, are taxed only when exercised, giving the holder control over the timing of the taxable event. This flexibility is increasingly valuable in a period when high-income tax brackets could change with future political shifts, allowing executives to time exercises in lower-rate years.
Investors can still capture the tax benefit of unrealized losses without permanently disposing of a security by using a hedged replacement purchase. The process involves buying an equivalent amount of the stock at least 31 days before selling the original losing position and hedging it with options to prevent further loss. After the waiting period, selling the original shares produces a deductible loss to offset gains. While the approach is legal, the IRS is more attuned to such tactics now, making precise execution and careful recordkeeping essential.
This method lets an investor convert ownership in income-producing property into cash without a taxable sale. The property is contributed to a partnership with a buyer, the partnership borrows against it, and the cash is distributed to the original owner. Since the proceeds are treated as a loan secured by partnership property rather than a sale, capital gains taxes are deferred. The current high estate exemptions make this even more attractive for long-term planning, but IRS attention to disguised sales means the structure must be clearly compliant.
Whole life, universal life, and variable universal life policies remain a cornerstone of tax-efficient wealth transfer. These policies allow for investment growth and a death benefit that are both income tax-free, and when owned by the right kind of trust, they can also avoid estate tax. The permanence of higher exemptions does not diminish their value, as they provide liquidity and certainty in estate settlements while maintaining favorable tax treatment.
Converting traditional IRAs to Roth IRAs continues to be attractive, especially for those expecting higher future tax rates. By splitting a large IRA into smaller accounts before conversion, investors can reverse only the underperforming accounts within the IRS’s recharacterization window, paying taxes solely on the accounts that gained value. This reduces risk and maximizes the benefit of tax-free future withdrawals, though it requires careful annual evaluation given potential changes in income and tax brackets.
Nonqualified deferred compensation plans allow high earners to set aside salary or bonuses, along with any investment growth, without paying taxes until withdrawal. This deferral can last decades, often until retirement when the individual may be in a lower tax bracket. With greater stability in deduction limits and exclusion amounts, executives now have more certainty when structuring payout schedules to match their long-term income planning goals.
The permanence of the estate exemption and the indexing for inflation mean that wealthy households should reexamine their estate documents to ensure they are maximizing portability between spouses and accounting for changing asset values. Advisors are stressing the importance of reviewing plans regularly, as overlooked portability elections or outdated structures can still cost millions in unnecessary taxes. With the temporary increase in the SALT deduction cap expiring after 2029, those in high-tax states may want to front-load deductible expenses or adjust income timing to make the most of the higher cap while it lasts.