If you’ve taken the time to calculate your Adjusted Gross Income (AGI) or Modified Adjusted Gross Income (MAGI), you are on the right track to a smart tax planning strategy.
Whether you were checking Roth IRA eligibility, estimating Medicare surcharges, or planning the tax implications of stock options, you’re already ahead of most taxpayers.
But here’s the catch: stopping once you’ve run the numbers on AGI or MAGI can leave major opportunities on the table.
For high-income professionals with complex compensation—bonuses, stock options, equity, multiple income streams—AGI and MAGI are only the first pieces of a much bigger tax puzzle. To truly minimize your tax liability, you need to think beyond this year’s return and plan across multiple years.
AGI and MAGI are more than just numbers that guide your federal income tax return. They’re gateways to determining your eligibility—or exposure—for a range of tax rules that disproportionately affect high-net-worth individuals. Common reasons to calculate them include:
If you’re running the numbers for any of these reasons, you’re already thinking strategically. But the real value lies in asking the next question: What comes after AGI/MAGI?
Many high earners fall into the trap of short-term tax planning:
These moves can feel like wins in the moment, but they often miss the bigger opportunity: minimizing your lifetime tax liability and building long-term wealth preservation strategies.
Once you know your AGI and MAGI, the next step is using that information to shape decisions that don’t just reduce this year’s taxable income but optimize your tax picture across decades. Here’s where high earners often see the biggest impact:
For executives and professionals with incentive stock options (ISOs) or large year-end bonuses, timing is everything. Exercising too many options in one year can push you into AMT territory, while stacking a big bonus on top of vesting income may unexpectedly trigger surtaxes.
Instead of reacting to each event in isolation, multi-year planning allows you to spread income across years. For example, exercising a portion of ISOs over several years can minimize AMT exposure while still allowing you to diversify your portfolio. Coordinating option exercises with charitable giving or tax-loss harvesting can further smooth income spikes and lower tax costs.
If you’re already charitably inclined, your giving can do double duty: supporting the causes you care about and lowering your tax liability.
Rather than donating cash each year, you may be better served by contributing appreciated stock to avoid capital gains tax. Or you might “bunch” several years of gifts into one tax year—often through a donor-advised fund—to exceed the standard tax deduction and create flexibility for future giving.
Another option if you're over age 70.5 is a Qualified Charitable Distribution (QCD). A QCD will allow you to benefit charity, fulfill your RMD requirement, and exclude that amount from your income. If you are past the age threshold, you can donate up to $100,000 per year from your IRA.
The right strategy depends on your income trajectory and tax situation over the next several years, not just this one.
High earners often find themselves phased out of direct Roth IRA contributions, but that doesn’t mean Roth planning is off the table. Backdoor Roth contributions or well-timed conversions from a traditional IRA can be powerful tools, especially in lower-income years or before Medicare surcharges kick in.
The key is coordinating conversions with other income sources so you don’t accidentally trigger higher federal income tax or push withdrawals into higher tax brackets later. Viewed over a 10- or 20-year horizon, strategically shifting funds into Roth accounts can provide decades of tax-advantaged and even tax-exempt growth—an essential part of comprehensive retirement planning.
Crossing an AGI or MAGI threshold by even a small margin can have outsized consequences. For example, the Net Investment Income Tax (NIIT) adds 3.8% to certain types of investment income, and Medicare’s Income-Related Monthly Adjustment Amount (IRMAA) can increase premiums by thousands of dollars annually.
With careful planning, you can time income recognition or deductions to stay below these thresholds across multiple years. A thoughtful tax planning strategy helps you avoid paying more than necessary under today’s tax laws.
Managing capital gains is another area where annual decisions fall short. For instance, you might strategically harvest gains in a year with lower income or use tax-loss harvesting to offset other taxable events.
Looking several years ahead also allows you to time large asset sales—such as a business exit or concentrated stock position—in a way that avoids stacking too much income in a single year and triggering higher capital gains tax or surcharges.
The difference between annual tax prep and multi-year planning is more than theory—it’s measurable. Consider this scenario:
An executive exercises all $500,000 worth of incentive stock options in a single year to “get it over with.” The large income bump pushes them into AMT, triggers the 3.8% Net Investment Income Tax, and results in a total tax bill of roughly $190,000.
Instead, the same executive works with a financial advisor to exercise portions of those options over three years. Each year, they also donate appreciated stock to a donor-advised fund, offsetting part of the added income.
By spreading the exercises and layering in charitable giving, they reduce AMT exposure and avoid crossing NIIT thresholds. Their combined tax bill over the three years is closer to $130,000.
With essentially the same income, they’ve kept an extra $60,000 working toward their goals instead of sending it to the IRS.
When you zoom out, the compounding effect of proactive financial planning and tax-efficient investment management can mean hundreds of thousands in lifetime tax savings—money that supports your family, fuels estate planning goals, and strengthens your legacy.
Coordinating bonuses, stock options, investment income, charitable giving, surtaxes, estate tax, and AMT exposure is incredibly complex. The stakes are high, and the window for optimal moves is often narrow.
This is where working with a fiduciary financial advisor makes the difference. A trusted partner doesn’t just prepare your taxes—they help you design and implement strategies that fit your income, investments, retirement accounts, and long-term vision for wealth preservation.
If you’ve calculated AGI or MAGI, you’re already ahead of most. The next step is turning those numbers into a strategy that reduces your lifetime tax liability, not just this year’s bill.
At Plancorp, we specialize in helping high earners take that step—from one-off calculations to comprehensive, proactive tax planning strategies that preserve more of your wealth.
Ready to move from reactive tax prep to proactive tax strategy? Let’s talk.