Income Shifting

Income shifting involves moving income from a high-tax situation to circumstances with a lower tax rate.

Last year, you made tons of money. Your modern dance studio really took off. You earned so much cash that it moved you into the highest tax bracket. Meanwhile, your sister earned almost nothing. If you shift some of your income to her, she’ll get taxed at a lower rate.

Income shifting can happen within companies, too. You own a hotel built right along the California/Nevada border. One half of the lobby is in Cali, the other is in the Silver State. California’s tax rate is much higher than Nevada’s, so you want to shift as much income as possible to the organization operating in Nevada.