Advanced Tax Strategies for High-Net-Worth Business Owners

When your income grows, so does your tax bill. As a high-net-worth business owner, you’re dealing with more than just higher rates. You’re also facing more complex rules, stricter reporting, and fewer off-the-shelf solutions. While ordinary tax strategies might work for most people, they may fall short for someone at your level. You need advanced tax strategies that can lower your tax exposure and protect the wealth you’ve worked hard to build.

In this guide, we’ll break down six advanced tax strategies that reduce taxes, increase savings, and safeguard your legacy, especially if you live overseas or plan to pass down wealth to the next generation.

What Qualifies as a High-Net-Worth Business Owner?

High-net-worth individuals (HNWIs) typically hold investable assets of $1 million or more. In the United States alone, over 5.4 million people meet this benchmark, more than any other country, according to the Henley USA Wealth Report 2025.

In fact, the United States now accounts for 37% of the world’s HNWIs and 36% of all billionaires. New York leads globally with 349,500 millionaires, followed by the Bay Area, Los Angeles, and Chicago.

While HNWIs may have limited access to common tax breaks, the good news is that you have more opportunities to leverage sophisticated strategies built for your level of income and risk.

6 Advanced Tax Strategies for High-Net-Worth Business Owners

1 ) Maximize contributions through a defined benefit plan

A defined benefit plan helps you save aggressively for retirement while reducing your current tax liability. Unlike IRAs or solo 401(k)s with capped contributions, this plan lets you stash away hundreds of thousands of dollars annually. This strategy works best, especially if you’re in your 40s or 50s and earning a steady, high income.

Each contribution counts as a business expense, which lowers your taxable income. Your money then grows tax-deferred until retirement. With the proper setup, this strategy offers one of the highest legal deductions available to business owners.

However, keep in mind that defined benefit plans are subject to strict rules and annual funding requirements. You’ll need an actuary and a tax advisor to ensure everything stays above board.

2 ) Use a family limited partnership to shift wealth and reduce estate taxes

Family limited partnerships (FLPs) let you move wealth to your children or heirs without triggering full gift or estate tax. The process involves creating a limited partnership and transferring business interests, real estate, or investments into it. You keep control as the general partner, while your family members receive limited partner shares.

Because those shares lack control and marketability, they qualify for valuation discounts, sometimes 20–40% less than the actual asset value. That means you can pass down more while paying less in tax.

FLPs also offer lawsuit protection and centralized asset management. This strategy is perfect for families with multiple income streams or international exposure.

3 ) Protect your business and reduce taxes through captive insurance

Captive insurance lets you set up your own insurance company to cover risks unique to your business. These are often risks that traditional insurers either won’t cover or will charge high premiums for. The premiums you pay to your captive company count as a deductible business expense.

Since you own the captive, any unused premiums or profits can later be returned to you. These are often paid out as dividends that may be taxed at a lower rate than ordinary income. 

This strategy works best for highly profitable businesses earning over $1 million annually with clearly defined insurable risks. Captives must meet strict regulatory requirements to stay compliant, so working with legal and tax professionals is non-negotiable.

4 ) Claim dollar-for-dollar savings through R&D tax credits

Many high-earning entrepreneurs overlook the Research and Development (R&D) credit because they assume it only applies to startups or tech firms. In reality, if you’re developing internal processes, improving systems, or building proprietary tools, you may qualify.

The credit is available at both the federal and state levels and provides a dollar-for-dollar reduction in tax liability, not just a deduction. It rewards innovation and applies to various industries, including software, manufacturing, construction, and professional services.

To qualify, you’ll need detailed documentation of your activities, wages paid to U.S.-based employees, and evidence of technological or process improvement.

5 ) Lower capital gains and boost deductions through charitable giving

Charitable giving helps you reduce taxes and do good at the same time. For high-net-worth individuals, it goes far beyond writing a check.

Donating appreciated assets, like stocks, business interests, or real estate, lets you avoid capital gains tax and claim a deduction for the full market value. You can also use charitable remainder trusts (CRTs) or donor-advised funds (DAFs) to create long-term tax benefits while supporting causes that matter to you.

This strategy enables you to defer taxes, reduce your estate size, and control how your gifts are distributed. They work well, especially if you’re preparing to sell a business, liquidate a major asset, or structure your exit from active ownership.

6 ) Choose the right business entity and location to minimize tax exposure

Your entity type and business location play a huge role in how much you owe. If you’re still operating as a sole proprietorship or single-member LLC, you may be missing out on tax-saving opportunities.

High-income business owners often benefit from switching to an S corporation to reduce self-employment taxes. You can also layer in a management company structure or create subsidiaries in low-tax states. And if you’re living abroad, you may qualify for special treatment under the Foreign Earned Income Exclusion (FEIE) or tax treaties if your structure supports it.

The right setup won’t just save you money, but also reduce your audit risk and improve asset protection.

What Are the Risks of Using Advanced Tax Strategies?

The IRS tends to take a closer look when taxpayers claim unusually large or aggressive deductions. While advanced strategies can lead to big savings, they can also cause problems if you don’t use them the right way.

Some advanced strategies, such as captive insurance or certain trusts, come with strict rules. If they’re not set up or documented properly, they can trigger an IRS audit or lead to penalties. That doesn’t mean you should avoid them altogether. It simply means you need to be cautious and work with a professional who can provide guidance.

If done right, these strategies can help you protect and grow your wealth. If done wrong, they can cost you time, money, and peace of mind.

Frequently Asked Questions (FAQs) On Using Advanced Tax Strategies

What’s considered high net worth for tax purposes?

If you have over $1 million in investable assets or earn more than $400,000 a year, you’re typically considered high-net-worth. This status opens the door to more advanced strategies that can help protect your income and grow your wealth.

Are defined benefit plans better than 401(k)s for high earners?

For high-income business owners, defined benefit plans offer much larger contribution limits than traditional 401(k)s. That means bigger deductions and faster tax savings. If your income is consistent and you want to supercharge your retirement plan, this option’s worth exploring.

How risky is captive insurance?

Captive insurance is legal, but only if it’s done right. The IRS keeps a close eye on these structures, so setup and compliance matter. With the right guidance, though, it can be a powerful tool for both risk management and tax savings.

Do I qualify for R&D tax credits if I run a non-tech business?

Yes, you don’t need to be in tech to claim R&D tax credits. If you develop new products, improve workflows, or build custom software for clients, you may qualify. Even consultants and service-based businesses can benefit.

Will relocating my business help me pay less tax?

It can, but only if it makes sense for your business. Some states and countries offer better tax treatment, but you still need to follow U.S. reporting rules.

Don’t Let Taxes Eat Into What You’ve Built

You’ve worked hard to build your business and grow your wealth. Now it’s time to protect it.

At Tax Samaritan, we help high-income earners and business owners like you create smart, proactive tax plans that reduce risk, build wealth, and ensure compliance, regardless of your location worldwide.

Book a free 30-minute consultation with us today by calling +1 (775) 305-1040 or clicking the button below.
Let’s build a tax strategy that works as hard as you do.