Income Shifting

Income Shifting refers to the strategic redistribution of income among family members or entities to minimize tax liability.

This practice often involves transferring income-generating assets or income streams to individuals in lower tax brackets, thereby reducing the overall tax burden for the family or business. For instance, a parent might gift shares of a family-owned business to a child, allowing the child’s lower tax rate to apply to the income generated from those shares. However, income shifting must comply with tax regulations to avoid penalties or reclassification by tax authorities.