If you own a closely-held corporation from which you receive wages, consider reducing the wages you take and paying your child instead. The child can utilize the standard deduction, low income tax brackets and maybe even personal exemption and/or education credits. Earned income is not subject to
Specific Details
A parent owns a closely-held corporation business and normally takes a salary of $60,000 from the corporation. The parent decided to reduce their salary by $5,000 down to $55,000 and put their child on the payroll. The child is paid the $5,000 instead. Since the parent is in the 24% federal and 8% state tax brackets and the child is in the 0% federal and 0% state brackets, they would save $1,600 in taxes.
Potential Savings
If you are in a combined (federal and state) tax bracket of 35% and your childs tax bracket is 0%, you could reduce your taxes up to $350 for every $1,000 of wage income you could shift to your child.