Income Shifting To 14+ Year Old Children Lowers Tax Bracket

Written by admin on January 8, 2010 – 1:43 am

Income shifting is quite common and is becoming more popular as married couples find ways to lower their income tax burden when making a higher-than-normal tax level. If you are the , age 14 or older, you may want to consider income shifting as a way to alleviate some of your own federal income taxes.

Earning a high income can lead to a higher federal income tax burden on married couples. For some couples, this tax burden can be in excess of 25%. But, with income shifting to a teenage, couples are learning ways to transfer their post-tax funds to their children, and then writing off those same “investments” as child income when federal income taxes are filed.

Because teenagers, age 14 and older, are not subject to the same tax burdens as their parents, shifting income to your teen can become a viable way to invest in your teen’s future. Even if your teenager withdraws the funds for personal use – say, to pay for school lunch or other expenses – the income tax bracket your teen will have on that income is usually zero to 15%. This is a large who are looking for ways to lower their own tax burden.

If you give your kids allowance, money for entertainment, or any other funds for investing in college or other financial tools, consider talking to a financial advisor about income shifting. In the long term, you can lower your own tax bracket while still providing for your teenager’s needs.

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