In short
Income shifting moves income to family members in lower tax brackets, for example by giving them income-producing property or paying children reasonable wages in a family business.
Key takeaways
- The kiddie tax limits shifting unearned income to children.
- Under the assignment of income doctrine, income from services is taxed to the person who earns it.
- A sole proprietor's child under 18 working in the business is exempt from Social Security and Medicare taxes.
Where it's tested
TCP: Individual Tax Planning Strategies — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Under the 'kiddie tax', a child's unearned income above a threshold amount is generally taxed: