How the wealthy aim to lower their 2026 IRS bills

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for the high-net-worth investor and consumer. subscription To receive future issues, directly to your inbox.

For seven years, wealthy Americans have faced a looming deadline to take advantage of tax provisions that were set to expire at the end of 2025. While the Big Beautiful Bill eased much of the uncertainty by making most of the cuts permanent, lawyers and tax accountants say the ever-changing tax code requires ongoing planning.

With this year’s Tax Day over, here are five of the top planning strategies that wealthy and high-income investors are considering for next year and beyond.

Last year’s tax bill permanently raised the estate tax exemption to $15 million per person, from $13.99 million. (It was initially scheduled to be cut in half at the end of 2025.)

The higher threshold has shifted the focus from reducing federal estate taxes to reducing taxes on income and capital gains. Minimizing capital gains has become critical after several years of strong market gains, according to Mitchell Drossman, head of national wealth strategies in Bank of America’s chief investment office. The S&P 500 has risen more than 75% since the beginning of 2023.

“The biggest tax story for me is the capital gains and investment story,” Drosman said. “You have a lot of clients who are making big money.”

Investors are increasingly turning to long- and short-term tax loss harvesting, an aggressive form of the popular strategy, in order to minimize capital gains, Drosman said. With traditional tax loss harvesting, investors sell losing assets to offset gains made on others. Long and short tax strategies, on the other hand, borrow against the portfolio to buy short positions that are expected to decline and hold long positions that are expected to boom.

“If there is natural volatility in the markets, you now have a greater amount of asset base to choose from in terms of loss harvesting,” he said. “But when you look at your overall portfolio, you’re still kind of neutral.”

The 2025 tax bill revamped the bonus deduction, allowing businesses to deduct the full cost of qualifying assets such as machinery, computers or vehicles in the first year of their use.

Many clients with operating companies invest with a payoff in mind, such as buying private jets, said Adam Ludeman, head of tax strategy at JPMorgan Private Bank.

Real estate developers and investors try to get the most for their money by evaluating which parts of their properties can be depreciated the quickest, according to Ludeman. For example, while a commercial building may take 39 years to depreciate, a parking lot can be depreciated over 15 years, allowing owners to recover costs faster.

A wave of blue states is considering new taxes on high-income earners and high-net-worth individuals in order to cover cuts in federal aid. California’s one-time billionaire tax proposal may end up on the November ballot, while Maine and Washington recently passed millionaire taxes.

A growing number of clients are asking how to change their tax situation as these proposals gain momentum, said Jane Dietelberg, chief tax strategist at Northern Trust Wealth Management. Depending on their state, residents can avoid state taxes by setting up trusts in states with favorable fiduciary income laws such as Delaware.

The most direct way to avoid local taxes is to change your domicile, which is easier said than done, according to Jerry Doyle of BNY Wealth. The Massachusetts-based senior estate planning strategist, who enforces the millionaire tax, said he has had clients move to New Hampshire and establish residency before selling their businesses.

Customers are often loathe to take the necessary steps to prove their intention not to return, Doyle said. For example, moving to Florida may not be enough to avoid Massachusetts taxes if you refuse to sell your home on Martha’s Vineyard.

“Everyone thinks if they spend 183 days in another state, you’re a resident of that state. That’s not necessarily true. Every state is a little different,” he said. “You [have] You have to change where you vote, where you register your car, even where your doctors are, what clubs you belong to, golf clubs, country clubs, things like that.”

One notable snag in last year’s tax bill was a reduction in the tax benefits of charitable giving for higher earners.

The bill limits the highest-paid donors in two ways. First, starting this year, donors who itemize will no longer be able to deduct charitable contributions that exceed 0.5% of their adjusted gross income, or AGI.

Second, taxpayers in the 37% tax bracket will have their itemized deductions reduced by 2/37 of the value. This ceiling reduces the actual tax benefit from 37% to 35%.

Ditelberg said many clients accelerated their charitable donations last year before these new rules went into effect. She said she expects clients to continue to “pool” their donations, by giving a larger amount in one year rather than spreading it out over several years, so they only make the 0.5% cut at once, either through their organizations or donor-advised funds.

The tax bill also provided an incentive for business owners and landlords to postpone the sale of their assets. The bill made permanent the Qualified Opportunity Zone program, which allows investors to defer capital gains by transferring them to a fund that invests in a low-income community.

Opportunity Zone Funds created under the first Trump administration still exist, but you can only defer taxes until the end of the year. New opportunity zones, which have not yet been identified, come with enhanced benefits, especially for investors in rural communities. For example, if you hold your investment in a qualified rural opportunity fund for five years, the capital gains will be reduced by 30% for tax purposes.

But you only have 180 days to roll over your winnings, and the new Opportunity Zone rules won’t take effect until 2027, Dietlberg noted.

“If you’re thinking about making big gains, you might want to hold off until August or September, rather than doing it in May or June, if you think you want to take advantage of an opportunity zone postponement,” she said. “I think we’ll see people make gains in the second half of this year.”

However, investors are waiting to see what the new funds entail. Some clients are reluctant to invest in opportunity zones again after their previous investments performed poorly, Drosman said.

“It’s a classic example of not letting the tax tail wag the dog because these have to be sound investments,” he said. “As with all investments, there is an element of risk and return.”