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Tax-Efficient Investing: How to Keep More of What You Earn in 2025

Lawless, Edwards & Warren – Wealth Management |
Categories
Tax Planning
Investments

For high-net-worth investors, taxes can be one of the largest recurring costs of building and  preserving wealth. Each year, Uncle Sam silently takes a cut of your capital gains, dividends,  and interest income, unless your portfolio is structured with tax efficiency in mind. In 2025, maximizing after-tax returns requires thoughtful planning, especially as investment  income thresholds, contribution limits, and gifting exemptions evolve. Below are several key  strategies we’re helping clients implement to reduce tax drag and keep more of what they earn. 

1. Max Out Tax-Advantaged Accounts 

Start by fully utilizing tax-deferred and tax-free accounts: 

  • 401(k): The contribution limit in 2025 is $23,500, with an additional $7,500 catch-up for  those over age 50.  

  • IRA & Roth IRA: Annual limits are $7,000, or $8,000 with catch-up. Roth eligibility phases out at $161,000–$181,000 for single filers and $240,000–$260,000 for joint. 

  • Health Savings Accounts (HSAs) and 529 plans continue to offer valuable tax benefits and should be evaluated in the broader context of cash flow and future expenses. 

We help clients prioritize where to contribute based on liquidity needs, income levels, and long term goals. 

2. Use Strategic Roth Conversions 

With the current tax brackets still intact through 2025 (barring legislative changes), Roth conversions can be a powerful tool to reposition assets into a tax-free bucket. For many high net-worth clients, converting IRA assets to a Roth IRA in tranches, especially in lower-income years, offers long-term tax diversification and estate planning advantages. Roth assets grow tax-free, don’t require RMDs, and are highly beneficial when passed to heirs. 

3. Minimize Capital Gains and Tax Drag 

Efficient taxable account management is critical. We employ:

 

  • Tax-loss harvesting to offset gains or ordinary income 

  • Holding periods over one year to lock in long-term capital gains rates (0%, 15%, or 20%) 

  • Municipal bonds, particularly in high-income states, to generate tax-exempt income 

  • Asset location strategies to place tax-inefficient assets (like REITs or high-turnover funds)  inside IRAs or Roths 

Additionally, high earners may trigger the 3.8% Net Investment Income Tax, another reason we review portfolios with a lens toward income thresholds and mitigation strategies. 

4. Gifting, Legacy & Charitable Planning 

With the federal estate exemption still near record highs at $13.99 million per person in 2025, strategic gifting can remove appreciating assets from your estate while supporting your heirs or philanthropic goals. 

We explore: 

  • Gifting appreciated securities to reduce income and avoid capital gains 

  • Donor-Advised Funds (DAFs) to bunch charitable deductions in high-income years 

  • Qualified Charitable Distributions (QCDs) from IRAs to offset RMDs tax-efficiently

These strategies align tax efficiency with your family’s long-term legacy. 

5. Coordinated Wealth Planning 

Tax efficiency doesn’t exist in a vacuum. Investment choices, income, estate plans, and charitable goals all intersect. That’s why our approach is holistic, coordinating across your CPA, attorney, and our team to proactively manage tax implications throughout the year. 

Final Thought: 

In wealth management, it’s not just about what you earn, it’s about what you keep. Let’s review your current strategy and identify ways to reduce tax drag in 2025. We’ll help you make smart decisions today to protect and grow your wealth for the future. 

Want to learn how to keep more of what you earn in 2025? Contact our team  today at 561-361-8140 or email lew@lawlessedwardswarren.com.  

ACKNOWLEDGEMENT: Representatives of AIC/AAS do not provide tax or legal advice. Please consult your tax advisor or attorney  regarding your situation. All information is believed to be from reliable sources; however, we make no representation as to its  completeness or accuracy. Representatives offer products and services using the following business names: Lawless, Edwards &  Warren – insurance and financial services | Ameritas Investment Company, LLC (AIC), Member FINRA/SIPC – securities and  investments | Ameritas Advisory Services, LLC (AAS) – investment advisory services. AIC and AAS are not affiliated with Lawless,  Edwards, & Warren.