Tax-Smart Investing in 2025: Don't Leave Money on the Table
Once your portfolio crosses the $200,000 mark, taxes start playing a much bigger role in determining your long-term returns. You might be choosing smart funds, rebalancing regularly, and thinking about retirement—but if you’re not also thinking about tax efficiency, you’re leaving money behind. In 2025, that’s more true than ever.
Between capital gains thresholds, looming legislative changes, and the growing complexity of many people’s portfolios, tax-aware investing isn’t just a nice-to-have. It’s a necessity. And yet, many investors—even experienced ones—overlook opportunities to reduce their tax burden or simply assume their current strategy is “good enough.”
Here’s a look at what’s changed, what’s often missed, and how high earners and high savers can take a more deliberate approach to tax-smart investing this year.
What’s New in 2025: Capital Gains, NIIT, and the Clock Ticking on Tax Refor
At a high level, the capital gains tax structure hasn’t shifted dramatically from last year. Long-term capital gains are still taxed at 0%, 15%, or 20%, depending on income. For high earners, there’s still the additional 3.8% Net Investment Income Tax (NIIT), which applies once your modified adjusted gross income (MAGI) crosses $200,000 (single) or $250,000 (married filing jointly). That means many upper-middle-income investors are already paying close to 24% on their gains—before they even look at state taxes.
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The bigger issue isn’t what’s already changed—it’s what’s coming. The Tax Cuts and Jobs Act (TCJA), passed in 2017, is set to expire at the end of 2025. That could mean a return to higher income tax brackets, a reduction in the estate tax exemption, and possibly higher capital gains rates for certain brackets. None of it is locked in yet, but the window to act under the current system is closing.
For anyone with a six-figure portfolio or upward trajectory in income, now is the time to be thinking proactively about positioning—before Congress does it for you.
Where Most Investors Slip Up
It’s not just the tax laws that cost people money—it’s the basic oversights. Some of the most common missteps don’t involve exotic strategies or high-risk decisions. They’re the kind of small things that compound quietly in the background.
A lot of investors, for example, skip over their tax-advantaged accounts. They might have a 401(k) or IRA set up, but they’re not maxing it out—or they’re unsure how a Roth might play into their broader strategy. Others sell off assets too quickly, triggering short-term capital gains that are taxed at much higher rates than long-term gains.
There’s also a persistent misunderstanding of cost basis. It’s easy to lose track of the original purchase price of assets—especially if you’ve made multiple buys of the same security or you’re dealing with dividend reinvestments. That can lead to overstated gains and bigger-than-necessary tax bills.
And then there’s the missed opportunity around tax-loss harvesting. In years like 2022 or even parts of 2023, investors had the chance to realize losses on paper and use them to offset future gains. But many didn’t act, or didn’t know how. That kind of oversight doesn’t just hurt for one tax season—it can ripple across several years.
It’s also common to see portfolios lacking any real tax diversification. Everything is in a pre-tax 401(k), or everything’s sitting in a taxable brokerage account. Without a mix of account types—pre-tax, Roth, taxable—you’re boxed in when it comes time to draw down in retirement or respond to future tax changes.
Finally, too many investors outsource these decisions blindly. They assume their software or tax pro has it covered. But unless someone is looking at your full financial picture—not just this year’s return—you’re likely missing strategic opportunities. Tax prep is not tax planning.
The Strategies That Actually Move the Needle
Most of the biggest wins in tax efficiency don’t come from loopholes or obscure tactics. They come from getting the structure right and making decisions with an eye on the long term.
Asset location is one of the clearest examples. Tax-inefficient investments like bonds, REITs, or actively managed mutual funds should typically sit in IRAs or 401(k)s. Tax-efficient holdings—index funds, ETFs, municipal bonds—can make more sense in taxable accounts. It’s not just about what you invest in, but where you hold it.
Tax-loss harvesting, when done properly, can help reduce capital gains exposure now and well into the future. Even if your overall portfolio is up, selling off specific underperformers and replacing them with similar (but not identical) assets allows you to bank the loss without derailing your plan.
Maxing out your tax-advantaged accounts—especially Roth IRAs, HSAs, and backdoor Roths for higher-income earners—should be standard operating procedure if you’re sitting on $200K+ in assets. These accounts provide powerful, long-term tax advantages, but the window to contribute resets every year. If you don’t use it, you lose it.
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Charitable giving strategies can also be overlooked. Donating appreciated stock instead of cash allows you to avoid capital gains while taking a full deduction on the value. Donor-advised funds (DAFs) make it easy to bunch multiple years of giving into one tax year without having to distribute all at once.
Roth conversions may be worth considering in 2025, especially if you expect rates to rise after the TCJA sunsets. Converting now means paying tax at today’s (still relatively low) rates in exchange for tax-free growth and withdrawals down the line. But the timing and amount matter—doing too much too fast can push you into higher brackets or cause other unintended consequences.
And across all of this, ongoing review is essential. Tax laws shift. Your income shifts. Your goals shift. The right move in 2021 might not be the right move now. A portfolio built for growth also needs to be maintained for tax efficiency.
Why It’s Worth Talking to an Adviser
There’s a difference between knowing what tax-smart investing looks like and actually applying it to your specific situation. Every investor’s mix of income, assets, account types, and goals is different. A well-structured portfolio for someone with $250K and a W-2 salary might look very different than one for someone with $400K, rental income, and plans to retire early.
That’s where working with a professional adviser makes a real difference. It’s not just about stock picks or investment products—it’s about understanding how your entire financial picture interacts with the tax code, both now and in the future.
And if you’re not already working with someone, it’s easier than you might think to start.
Get Matched with an Adviser for Free
WiserAdviser is a free matching service that connects you with fiduciary financial advisers who specialize in high-net-worth tax planning and portfolio management. If you have $200,000 or more in investable assets, you can get matched with an adviser who understands how to help you keep more of what you earn—no obligation, no fees to get started.
Tax-Smart Investing in 2025: Don’t Leave Money on the Table originally appeared on Benzinga.com.