I would certainly encourage a good student to take the highest classes that they can in areas that interest them and they can succeed in–not to get into a top 20 college, but to be among other top students in their high school and to have the best teachers and the best learning environment possible. I would also encourage all students to get involved in EC’s and community service–to find and stick with interests that will help them grow and learn. And if they can eventually take leadership positions, or start a new club or organization, even better!
Ultimately that is what colleges are looking for. If your child does that in the next 4 or 5 years, they will keep open all options for college. I would not close doors by saying–why bother taking an AP class or a higher level math class if it is not beyond their reach. Who knows what will be when your child applies to college?
In the span of 4 years between when my youngest and oldest applied to college, the ivies expanded the level of support to upper middle class families a great deal. It might not help you, but it did make it so that a family with an income of $180K may only need to pay $18K a year for Harvard, whereas in the past they would have been full pay. In the same period of time, the merit aid from schools like Brandeis and American University decreased. So for my older D, Brandeis would have been the cheaper school if our income was at $180K, but for my younger D, Harvard would have been far lower. Like you, our income was above that threshold–but who knows what might happen when your D applies?
As for standardized testing, I know many great students who did great without extensive prep at all. And other great students who needed a lot of prep to just get their scores high enough to get into honors at their state school. Some kids are great test takers and some need support to learn how. For some, it’s finding the right test–ACT or SAT. Older D was stuck at 650 math on SAT–took ACT without any additional prep and nailed a 35 on the math section.
Both my D’s got accepted to every school they applied to and got the merit scholarships I expected they would. Neither applied to ivies–unless you count Barnard–because we did not feel it was the best fit based on their majors (vocal performance and studio art.) Between the two of them they got talent scholarships/merit money for academics/ leadership at schools like: NYU, Brandeis, GW, American, Muhlenberg, Goucher, and Pratt Institute. Their awards ranged from $11K to $24K per year.
For older D we decided to try to get her costs equivalent to an out- of -state public university. As a NYer, we were not thrilled with our in-state options. D ended up at NYU with a merit talent-based scholarship.
For younger D, we ended up letting her attend NYU as well. She applied ED, so was not eligible for merit aid. We did have her apply to some schools early action, but she turned them down despite scholarship $ because we knew that NYU was a better fit. In the end, the extra money we spent was worth having a happy child in the right program.