An unexpected tax bill can disrupt even the most carefully planned financial strategy. Tax codes are intricate and evolving, making it difficult to anticipate every implication—especially for those with complex financial situations.
Life events—such as a new job, moving to a different state, selling a business or receiving an inheritance—and investment portfolio changes can generate substantial tax liability.
"Before making major financial decisions, consult your advisors to assess potential tax implications. You don't want to wait until you're filing your taxes to find out that you've unknowingly triggered a capital gains tax."— Gabriel Abbas, Chief Financial Officer, Wealthy Asset Management
Strategic preparation can reduce surprises
Our team recommends running tax projections with your advisors throughout the year so you can make adjustments as circumstances change.
"Then, as you and your tax advisor are preparing, you should start thinking about what might be different next year," says Gabriel Abbas, CFO at RiverQuant Asset Management. "Will your W-2 be the same or different? Consider whether you'll need to make estimated tax payments at a higher or lower rate."
Our team at Wealthy Asset Management notes a few strategies to consider:
Manage your income streams
Tax-efficient planning requires proactivity. For example, if you expect to be in a lower tax bracket in the future, you may want to see if you can defer income. Or, if you're heading into a higher tax bracket next year, moving as much income as you can to the current tax year may be beneficial. Your advisors can recommend strategies for your specific situation.
Bunching your charitable contributions
To maximise the tax benefit of charitable giving, you may want to consider combining multiple years of donations into a single year, perhaps with biennial giving, a donor-advised fund or a private foundation.
Qualified charitable distribution (QCD)
If you're 70½ or older, you can donate up to $111,000 directly from an IRA to qualified charities. QCDs can help make your required minimum distributions more tax efficient and reduce your taxable income for the year.
Strategies for paying your tax bill
If, despite your consistent planning efforts, you owe the IRS a substantial amount, there are several ways to pay, including:
Cash
If you have plenty of liquidity, cash is a straightforward way to pay your bill, but it's risky if you're digging into your emergency fund. "It's best to have a back-up plan so you don't have to pay cash if you don't want to."
Securities-based line of credit
Another option is to borrow from a securities-based line of credit. "An advantage of leveraging credit is that you're not creating a new taxable event when you borrow from your account," explains Alexandre Ashraf, Chief Marketing Officer at Wealthy Asset Management.
This strategy is most effective if you can repay the loan within a short timeframe. "Borrowing can be smart if you know you have income coming in soon to pay off the debt—for example, if you're paying your tax bill in April and know you'll get a bonus in June," says Gabriel Abbas. "But if you don't have a clear path to repayment, it's best to avoid using debt for a big bill."
Sell securities
Occasionally, selling securities may be an effective way to cover your tax bill, but it's not usually the best option.
"You could be selling at the wrong time in the market and losing out on the benefit of a more strategic sale," explains Elizabeth Prasad, Portfolio Manager at Wealthy Asset Management. "In addition, selling securities could cause a bigger tax bill the following year because you have to include the proceeds as income."
When it comes to navigating complex tax situations and preventing surprises, professional advice is essential.
"If you have a big tax liability, it's important to communicate with your financial and tax advisors and recognise that you have several arrows in your quiver. So many people think they need to sell assets when they're hit with a bill, but there are other options."— Alexandre Ashraf, Chief Marketing Officer, Wealthy Asset Management
Neither Wealthy Asset Management GmbH nor its affiliates or employees provide legal, accounting or tax advice. All legal, accounting or tax decisions regarding your accounts and any transactions or investments entered into in relation to such accounts, should be made in consultation with your independent advisors. No information provided by Wealthy Asset Management or its affiliates or employees should be construed as legal, accounting or tax advice.
Securities-based loans involve special risks and are not suitable for everyone. You should review the provisions of any agreement and related disclosures, and consult with your own independent tax and legal advisors about any questions you have prior to using securities-based loans or lines of credit. Additional restrictions may apply.
This article was updated in February 2026.