Marginal Tax Rate Management

Marginal Tax Rate Management refers to the strategic approach individuals and businesses take to minimize their tax liabilities by understanding and manipulating their marginal tax rates—the rates applied to the last dollar of income earned.

This involves planning income and deductions in a way that keeps taxable income within lower tax brackets, deferring income to future years, or accelerating deductions to reduce taxable income in the current year. For example, a taxpayer might decide to delay a bonus until the next tax year if they anticipate being in a lower tax bracket, thereby reducing the overall tax burden.

Effective marginal tax rate management can lead to significant tax savings and improved financial planning outcomes.