I recently attended the Basis Northwest Conference in Seattle, which centered around tax-aware investments and how the landscape is changing. About 30 years ago, ETFs were the hot new thing. But as wealth continues growing and incomes rise, they’re not enough to meet the demands of high-net-worth investors. More often, clients are coming to me focused on achieving greater after-tax return through more sophisticated tax strategies, and a few potential strategies stand out.
What Tax Strategies Are Gaining Traction?
Traditionally, certain tax-aware investing tools were limited to institutional investors and the ultra-wealthy. However, many of those have recently become accessible to individual investors. While the following approaches won’t work for everyone, these strategies are worth considering:
Tax-aware long/short: Tax-aware long/short strategies aim to generate losses used to offset realized gains while maintaining market exposure.
351 exchanges: Investors contribute appreciated securities into a diversified investment vehicle without immediately triggering capital gains taxes. For those with a large position in a single stock, a 351 exchange offers diversification while deferring the tax consequences of a sale.
Tax-aware hedge funds: Certain hedge fund structures try to generate losses or deductions that can offset other sources of taxable income (including W-2 income or Roth conversions).
Oil and gas exploration: Direct investments in oil and gas exploration can provide substantial tax deductions, often allowing investors to deduct a significant portion of their investment in the early years.
Real estate depreciation: Real estate investors benefit from depreciation deductions, which reduce taxable income even as the underlying property potentially increases in value.
Box-spread loans: A relatively new strategy, box-spread loans use your existing investments as collateral to offer reduced interest rates on loans. Box-spread loans tend to benefit those who need liquidity but prefer not to sell appreciated investments outright.
Incorporating Tax-Aware Strategies Into Your Portfolio
Many of the strategies shared above are beyond what’s available through a standard custodial platform or typical advisor relationship. Because they lack accessibility, the number of investors able to implement these more sophisticated tax-aware strategies is limited.
But for those who are able and willing to try, the next hurdle is understanding how these strategies fit together and when they make sense.
Let’s take, for example, an investor with a substantial amount of concentrated single company stock they’ve accumulated over many years. Selling this highly appreciated stock outright to reduce concentration would create a significant tax bill. Instead, they may pursue a tax-aware long/short strategy, which would generate potential losses that help offset future gains. At the same time, they might explore a 351 exchange that would help diversify some of those concentrated holdings without triggering capital gains tax.
Or, consider a business owner preparing to sell their business. Negotiating the highest sale price is important to them, but so is preserving as much after-tax proceeds as they’re able. Again, tax-aware long/short strategies could help offset a portion of that eventual gain and improve the overall after-tax outcome.
Investors with large 401(k) balances or cash balance plans may want to pursue Roth conversions during favorable tax years. Tax-aware hedge fund strategies aim to create deductions or losses that make those conversions more tax-efficient.
An investor with a need for liquidity — for example, if they’re purchasing a new home — may not want to liquidate appreciated investments to access cash. Similarly, an investor committing capital to a private equity opportunity may prefer to leave an existing portfolio intact. In those situations, a box-spread loan can bridge the gap, providing access to capital while allowing the underlying investments to remain invested.
Keep More of What You Earn
What you keep matters as much as what you earn. The investors who understand that plan for taxes year-round, not just in April. It takes strategic planning and careful consideration to find the right mix of tax-aware tools for your specific needs. If you’d like to see how a tax-aware approach could work for you, reach out to our team today to schedule a complimentary consultation.
Sean Gerlin, CFP®, CPWA®, ChFC®, CLU®, is the Founder and Principal of Envision Wealth Planners, a fee-only financial advisory firm serving clients across Central Florida, including Orlando, Winter Park, Maitland, and nearby communities. In 2025, he was honored with both the Wealthtender Voice of the Client Award and the Best of BusinessRate 2025 award, recognizing his commitment to exceptional client experience and long-term relationship-focused planning. Sean specializes in helping high-income families, business owners, and commercial real estate executives align their wealth with their values through a comprehensive Financial Life Planning approach. Learn more about EWP at envisionplanners.com.
This material has been edited with the assistance of artificial intelligence tools. The information presented is based on sources believed to be reliable and accurate at the time of publication. This material is for educational purposes only and does not necessarily reflect the views of the author, presenter, or affiliated organizations. It should not be construed as investment, tax, legal, or other professional advice. Always consult a qualified professional regarding your specific situation before making any decisions.