Authored by: Dale Shaw, CFP, RICP

As your wealth grows, so does the complexity of your financial obligations. One of the most significant and often misunderstood aspects of financial planning is navigating tax thresholds. These thresholds, the income levels at which specific tax rates or rules apply, play a pivotal role in determining your overall tax liability. For high-net-worth individuals, business owners, and corporate executives, understanding these thresholds is critical to optimizing wealth preservation and ensuring compliance.

At Granite Harbor Advisors, we aim to simplify this complexity, helping our clients make informed decisions that align with their financial goals. In this article, we’ll provide a practical overview of tax thresholds and share strategies for navigating them effectively.

What Are Tax Thresholds?

Tax thresholds determine when specific tax rates, surcharges, or financial obligations apply. Some notable thresholds include:

• Income Taxes: Progressive tax rates increase with higher taxable income.
• Capital Gains Taxes: Rates depend on income level and duration of asset holding.
• Medicare Surcharges (IRMAA): Additional premiums for Medicare Parts B and D based on Modified Adjusted Gross Income (MAGI).
• Net Investment Income Tax (NIIT): A 3.8% surtax on certain investment income above specific thresholds.
• Estate and Gift Taxes: Limits on wealth transfers that can be made tax-free.

Navigating these thresholds effectively is key to maintaining tax efficiency, especially for high income earners.

Federal Tax Thresholds for 2025 (Based on AGI)

Income Tax Brackets (Married Filing Jointly)

• 10% Bracket: Up to $23,850
• 12% Bracket: $23,851 – $96,950
• 22% Bracket: $96,951 – $206,700
• 24% Bracket: $206,701 – $394,600
• 32% Bracket: $394,601 – $501,050
• 35% Bracket: $501,051 – $751,600
• 37% Bracket: Over $751,600

Capital Gains Tax Rates (Based on AGI)

• 0% Rate: Up to $96,700
• 15% Rate: $96,701 – $600,050
• 20% Rate: Over $600,050

IRMAA Thresholds for 2025 (Based on MAGI 2 years prior)

Medicare Part B and D Monthly Premiums

• $212,000 or less: Standard premiums ($185/month for Part B).
• $212,001 – $266,000: Additional $74 for Part B, $13.70 for Part D.
• $266,001 – $334,000: Additional $185 for Part B, $35.30 for Part D.
• $334,001 – $400,000: Additional $295.90 for Part B, $57 for Part D.
• $400,001 – $750,000: Additional $406.90 for Part B, $78.60 for Part D.
• Over $750,000: Additional $443.90 for Part B, $85.80 for Part D​

Net Investment Income Tax (NIIT) Thresholds

A 3.8% NIIT applies to the lesser of net investment income or MAGI exceeding

• $200,000 (single filers).
• $250,000 (married filing jointly)

Net investment income includes income from interest, dividends, capital gains, rental income, and other passive sources. For high-income earners, managing exposure to NIIT is critical to avoiding unnecessary taxes on investment returns.

Strategies for Managing Tax, IRMAA, and NIIT Thresholds

1. Optimize Retirement Income

• Roth Conversions: Convert traditional IRA assets to Roth IRAs during low-income years to reduce future Required Minimum Distributions (RMDs), which can increase taxable income and trigger IRMAA and NIIT.
• Taxable Account Withdrawals: Use taxable accounts, Roth IRAs, or cash value from life insurance strategically to stay under key thresholds.

2. Harvesting Gains and Losses

• Offset capital gains with losses to stay within lower tax brackets.
• Realize gains strategically to take advantage of the lower capital gains rate thresholds

3. Income Smoothing and Timing

• Deferring Income: Delay income to a later year to stay under IRMAA or NIIT thresholds.
• Accelerating Income: If future tax rates are expected to rise, recognize income earlier to lock in lower rates.

4. Charitable Giving

• Qualified Charitable Distributions (QCDs): Donate directly from IRAs to reduce taxable income, without increasing MAGI for IRMAA or NIIT purposes.
• Use donor advised funds to bundle contributions for maximum tax impact.

Why Proactive Planning Matters

For high-net-worth individuals, tax thresholds like IRMAA and NIIT can lead to significant costs if not properly managed. These thresholds are not static and subject to changes in legislation, income levels, and investment performance. A full review of the tax changes for 2025 can be found here. Regularly reviewing and adjusting your financial strategy with a trusted advisor ensures confidence and can reduce unnecessary expenses.

At Granite Harbor Advisors, we provide expert guidance tailored to the unique needs of high income earners and their families. We specialize in managing complex tax thresholds as part of a comprehensive wealth management plan. Our collaborative approach involves working alongside CPAs and legal professionals to enhance tax efficiency and align strategies with your long term objectives. This includes efforts to refine investments and implement strategic retirement planning, focusing on preserving and managing wealth effectively. Contact us today to learn how Granite Harbor Advisors can help you manage tax thresholds and position yourself for long-term success.