Today we round out major tax strategies #2 and #3. As a refresher, here are the three basic tax planning strategies:

  1. Timing (deferring or accelerating taxable income and tax deductions)
  2. Income shifting (shifting income from high to low tax rate taxpayers)
  3. Conversion (converting income from high to low tax rate activities)

Tax rates vary across taxpayers and tax jurisdictions. This opens up planning opportunities for us.

We can shift income from high-tax-rate parents to low-tax-rate children. (In doing so, be careful of the assignment of income doctrine.) We can also shift income between businesses and business owners. We can also shift income between counties, states, and countries to save on tax.

Conversion strategies involve adjusting specific activities (for example between wages and dividends or between individual expenses and investment and business expenses).


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