A phone call I occasionally receive goes something like this: a client reaches out mid-year, energized by a large bonus, a business sale, or an unexpected windfall. The good news is obvious, but what is less obvious is the tax bill coming in April.
High-income years catch even financially prepared families off guard. Without the right plan, a strong earning year can leave you scrambling when April arrives. A little proactive planning early on changes that picture entirely.
The five strategies below come straight from conversations I’ve had with clients navigating exactly this.
1. Communicate Early and Often
High-income-year tax planning works best when your financial advisor and your CPA are working from the same information and talking to each other throughout the year, not just at tax time.
If you’re anticipating a large bonus, a business sale, or significant capital gains, both your advisor and CPA need to know as early as possible. That timing matters because withholding adjustments, estimated tax payments, and investment decisions all have deadlines, and catching up in February is a lot harder than planning in June.
Regular check-ins during the year allow your advisor to flag portfolio changes that may trigger tax consequences, and your CPA to adjust withholding or estimated payments accordingly. When those two conversations are happening in silos, things fall through the cracks. When they’re coordinated, the decisions you make feel intentional rather than reactive.
One practical note: if your advisor is proactively setting aside cash within your portfolio to cover an anticipated tax payment, that’s a sign the team is functioning the way it should.
2. Estimate Your Tax Liability Mid-Year
Once you have a clearer picture of your income, the next step is projecting what you will actually owe—federal and state—before year-end. Waiting until you’re sitting across from your CPA in March is too late to do much about it.
A mid-year projection lets you make decisions with real numbers. It also surfaces a few thresholds worth knowing about. If your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly), your investment income may be subject to the Net Investment Income Tax, an additional 3.8% on top of your regular rate. For a high-income year that pushes you past that line for the first time, that can be a meaningful and unexpected number.
Underpayment penalties are another consideration. The IRS expects you to pay taxes as income is earned, not just at filing. If your prior-year AGI exceeded $150,000, which applies to most professionals in a high-income year, you’ll need to pay at least 110% of last year’s tax liability through withholding and estimated payments to avoid a penalty. Paying the full balance in April isn’t enough if you’ve been underpaying throughout the year. Your CPA can calculate exactly what that number looks like for your situation.
3. Max Out Retirement Contributions
One of the most direct ways to reduce taxable income in a high-earning year is to maximize contributions to tax-advantaged retirement accounts. Yet this is often an afterthought.
If you have access to a 401(k), contributing the maximum ($24,500 in 2026, or $32,500 if you’re 50 or older) reduces your taxable income dollar for dollar. If you’re between ages 60 and 63, a “super” catch-up contribution allows you to contribute up to $35,750. Business owners have even more flexibility; a SEP-IRA or solo 401(k) can allow contributions well into the six figures depending on your net earnings.
One change worth paying attention to in 2026: if you earned more than $150,000 in FICA wages in 2025, your catch-up contributions must now be made as Roth contributions rather than pre-tax. This is a new SECURE 2.0 requirement that took effect this year and applies to most working professionals at this income level. It doesn’t eliminate the tax benefit, but it does change when you receive it.
One thing worth noting: a high-income year is generally not the right time for a Roth conversion. You’d be converting pre-tax dollars at your highest marginal rate. That strategy tends to make more sense in lower-income years.
4. Accelerate Deductions
High-income years present a real opportunity to reduce taxable income by moving planned deductions into the current year.
Rather than giving cash, consider donating appreciated securities you’ve held for more than a year directly to a qualified charity or donor-advised fund. You can deduct the full fair market value and avoid paying capital gains on the appreciation. If you give regularly, bunching two or three years of donations into one high-income year may allow you to itemize and exceed the standard deduction threshold.
If you have medical expenses or other deductible costs you’ve been putting off, paying them before year-end can increase your deductions. The same applies to state and local taxes. The SALT deduction cap increased to $40,400 for 2026. Keep in mind that if your MAGI exceeds $505,000, the deduction begins to phase back down, potentially to as low as $10,000 for the highest earners.
Deductions only count in the year they’re paid, so if December is approaching and you haven’t reviewed your options, that window closes quickly.
5. Defer Income When Possible
Deferring income to the next tax year can reduce your current-year tax burden, especially if you anticipate being in a lower bracket the following year. This could include delaying the receipt of bonuses, commission payments, or self-employment income until January of the following year.
For employees, it may be possible to ask that a year-end bonus be paid in January rather than December, pushing that income into the next tax year. For business owners, this might mean adjusting the timing of invoice payments or managing the recognition of profits. Coordinating these moves with your CPA and financial advisor can keep the strategy effective without creating cash-flow issues.
High-Income-Year Tax Planning: Take Control of Your Taxes
High-income-year tax planning is less about finding loopholes and more about making sure the people in your corner have the information they need to act early. The strategies above won’t eliminate your tax bill, but they can keep the number from catching you off guard and make sure you’ve made the most of the options available to you.
I take a collaborative, fee-only fiduciary approach to high-income year tax planning. Together with your CPA, I evaluate your situation, discuss timing and deductions, and create a plan to diminish surprises and help your wealth serve your life goals.
Get in touch today by calling (317) 469-2455, emailing ssteel@deerfieldfa.com, or using my online calendar. See what my clients have to say about working with me here.
Frequently Asked Questions About High-Income-Year Tax Planning
What is high-income-year tax planning?
High-income-year tax planning refers to strategies used to manage the tax impact of an unusually large income year. This might occur due to a bonus, business sale, stock option exercise, or large capital gains. Planning ahead helps you estimate tax liability, adjust withholding or estimated payments, and explore deductions or income timing strategies that may reduce surprises at tax time.
What can trigger a high-income year?
Several events can create a high-income year, including large bonuses, the sale of a business or property, significant investment gains, stock option exercises, or one-time consulting or contract income. When income jumps unexpectedly, proactive planning with your advisor and CPA can help you prepare for the tax impact and manage cash flow more effectively.
How can a financial advisor help with high-income-year tax planning?
A financial advisor can work alongside your CPA to project tax liability, coordinate investment decisions that may create gains or losses, and identify strategies such as charitable giving, deduction timing, or income deferral. Advisors like Susie Steel at Deerfield Financial Advisors help clients in Indianapolis and beyond approach high-income years with a coordinated strategy designed to reduce tax surprises.
About Susie
Susie Steel is COO, Wealth Manager, and Senior Shareholder at Deerfield Financial Advisors, a fee-only financial advisory and wealth management firm with offices in Indianapolis and Chicago. With over three decades of experience in financial planning, Susie’s approach has always been rooted in a spirit of service, treating each client as an extension of her own family. She simplifies the complex for clients, with the goal of creating a calm, trusting, and nurturing environment. Her unwavering commitment to the principle of “To whom much is given, much will be required” serves as the driving force behind her dedication, diligence, and empathy.
Susie obtained a business management degree from Ball State University, holds the CERTIFIED FINANCIAL PLANNER® designation, and held the Accredited Estate Planner (AEP®) designation from the National Association of Estate Planners & Councils (NAEPC) from 2013 to 2018. Susie is actively involved with an extensive list of professional organizations, including NAPFA (The National Association of Personal Financial Advisors), a premier association of fee-only financial advisors, and has served on multiple boards, committees, and councils. Her consistent recognition as one of Indianapolis Monthly’s “Five Star Wealth Managers” for the past decade attests to her outstanding accomplishments (2009-2025).
Outside the professional realm, Susie has contributed to her community through numerous efforts including her involvement in the Financial Center First Credit Union (FCFCU), the Indianapolis Children’s Museum Planned Giving Council, the Kiwanis Club of Northwest Indianapolis, and Junior Achievement. She mentors women through the CFP® Board’s “WIN-to-WIN” program, embodies the spirit of Rotary Club of Carmel, advocates for Indiana Canine Assistant Network (ICAN), and actively serves on the board of the Mary Rigg Neighborhood Center (MRNC).
Susie and her husband, Kevin, reside in Carmel, Indiana, where they raised their three children. Outside the office, her focus centers around family, spirituality, and fostering meaningful connections. Embracing the concept of the body as a temple, her personal growth is nurtured through practices like strength training, yoga, and meditation. In her leisure time, she enjoys strolls with her dog, Lulu, and indulges in movies, podcasts, books, and the theater. To connect with Susie online, follow her on LinkedIn or Facebook.
