Strategic Income Shifting from Parents

[Lane Kawaoka]

What are your strategies for income shifting? Long story short, I have a client who needs to support parents, and they can do some small "administrative tasks" in his business. What is the most tax-efficient strategy? Pay them via a 1099? Others mentioned putting it into a self-directed IRA. What would you do if you wanted to pay your parents or contribute to their retirement? sign a W9 and issue the 1099 to debit your end or your entity and they receive this as income and they file the income at their rate while you deduct it at your rate. Assuming you're rate is higher than theirs, you save the delta of those two rates, thereby achieving tax arbitrage.ook at tax brackets for 2018 and figure it out how much you want to give it sounds like if you issue two 1099's they will have 20k income as a whole (or each) depending if you issue them both 1099's. Standard deduction for 2018 is 24k married or 12k single so anything under these are tax free anyway. Maybe not self employment tax free but fed tax free.

Here are some other thoughts:

You can gift them up to 15k year to each person (30k total) tax free for you and them from what I know of this. But this does not help with taxes.

https://www.irs.gov/businesses/small-businesses-se...

The other side of the coin is that if your parents go into an old person home some people strategically dispose of all their assets so they become a warden of the State. But there is a 5 year look back for this so you have to plan ahead.