Tax Incentives for High Net Worth Individuals

Steven Zenios31/07/20194min
For those who have worked hard all their life to become a High Net Worth Individual, it is natural to protect their wealth. Tax can be a draining threat to one’s wealth so for those who seek to reduce the amount of tax here are some examples of tax incentives for High Net Worth Individuals.

Mortgage Interest Deduction

This incentive is designed to encourage homeownership by providing a tax break on the interest you pay on a house. To apply you must itemize on IRS Form 1040 Schedule A to claim the deduction, if you qualify for this you are also able to deduct the interest paid on a second home. This is ideal for High Net worth Individuals who may own multiple properties.

Capital Gains

Ordinary incomes such as wages are taxed at 35% however, long term capital gains that originate from the sale of investments from assets such as stocks and bonds that are held for more than a year are taxed at just 15%.


Heirs to wealth can save even more on tax thanks to the step-up. This allows High Net Worth individuals to pass along their wealth in assets that have increased in value with their heirs never paying any taxes on it. This is possible through the special Internal Revenue Service inheritance rules that states when an individual inherits assets such as stock, real estate or a business the step-up can apply, what the deceased originally purchased them for – to the current market value, therefore, when selling assets the heir would only be taxed on their gain in value for the time of the inheritance.

Retirement Savings

Tax retirement plans are designed to aid people to save for retirement. Taxpayers can shelter their personal income via 401(k) plans, pension plans, and individual retirement accounts. According to the Tax Policy Centre, High Net Worth Individuals can enjoy 80% of tax write-offs when planning for retirement.

Charitable Giving

The charitable-giving deduction operates as a matching program. If you make a donation you receive a tax break, the value of the deduction increases with the income. For example, if a High Net Worth Individual gave $1,000 to charity (in a 10% tax bracket) $100 are returned on taxes, however, if a donator was in the 35% tax bracket $350 is returned. To claim this an IRS Form 1040 Schedule is required to claim the charitable donation.

For those that are willing to chase even more appealing and beneficial tax incentives, some countries have made it their goal to entice investors via tax incentives.


The Italian government has recently announced a number of proposals to entice HNWI to transfer their tax residence to Italy with the option of a “substitute tax” that charges a yearly fee for foreign-related income. The tax is equivalent to 100,000 euro and is charged irrespective of the amount of income that Is earned abroad. Another aspect is that the taxpayer is not required to report assets or financial investment to tax administrators.


Cyprus has introduced the “Domicile” regime, High Net Worth individuals declare Cyprus as their taxable jurisdiction and receive an exemption from Cyprus personal taxes such as the special contribution for defences. Taxpayers who have an income of €100,000 annually from outside Cyprus will be given a 50% tax exemption.

Steven Zenios

Steven Zenios is a young author and designer with strong passion. A specialist in web design and development, blogger, author and Blockchain entrepreneur. He is the CEO of Web Theoria, a digital agency based in Cyprus. In the last 10 years, he has vastly improved his knowledge and skills to produce great pieces of work, both in the web design industry and article/blog industry. Contact Steven at +357-22029786 ext: 6120 or by email at [email protected] for editorial related questions.

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