Strategy 04
Income Shifting
Legally redistributing income across family members or entities to lower aggregate tax exposure.
Discuss this strategyWhat it is
Income shifting is the legal redistribution of taxable income across taxpayers in a family group or across entities under common ownership so that the aggregate tax bill is lower than if all the income were taxed at the highest-bracket member. Common mechanisms include hiring family members at reasonable compensation, gifting income-producing assets, family limited partnerships, intra-family loans at the applicable federal rate, and trusts that allocate distributable net income to lower-bracket beneficiaries.
Who it is for
Family-owned businesses, owner-operators with adult or working-age children, families with concentrated investment income, and households with significant disparity in marginal rates between members.
Related strategies
Three strategies that travel with this one.
Strategy
Entity Optimization
Structuring business entities (S-corp, C-corp, LLC, partnership) for optimal tax treatment.
Strategy
Charitable / Trust Planning & Other Advanced Strategies
Donor-advised funds, charitable remainder trusts, dynasty trusts, and related estate-and-tax planning structures.
Strategy
Cash Balance Plans
A defined-benefit retirement plan structured with hypothetical account balances.
Next step
See whether this strategy fits your facts and circumstances.
The first call is fact finding only. We tell you whether this strategy belongs in your plan, and what would have to be true for it to apply.
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