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Secondary Split Income - Reduce Tax
If you’re in a higher tax bracket than your spouse or child, any plans you may have to split income with your spouse or child by loaning or giving cash or other assets to them so they can invest probably won’t work - the tax rules will tax any income earned on any funds in your hands at your higher tax rate. After that, however, any income from that income (secondary income) will be taxed in your spouse’s or child’s hands at the lower rate since it is not income from the property that was originally transferred. Over time, a significant amount of such income can be built up. If you adopt this technique, be sure to maintain separate bank accounts and accurate records.
Click HERE for more discussion on splitting income.
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