How to Lower an Individual Tax Bracket

Income tax is a burden for every individual breadwinner, no matter what the federal tax bracket. Lowering your tax bracket can save you lots of money when it comes to tax time. While there are few ways to literally lower your bracket, there are a number of ways to defray the amount of tax you actually pay. Read on to learn how to lower an individual tax bracket.

Instructions

1. Earn less money. For people who fall into the bottom of a given tax bracket, earning less money is one way to fall into a lower tax bracket while saving money. If you fall into the bottom one percent of a tax bracket, the difference in income will be outweighed by the lower income tax you pay if you drop your income down enough to bump you into the lower bracket.

2. Shift investments and income to children. One way to lower your tax bracket is to shift your income to your children. Especially if you're a business owner, shifting your income to children has the benefit of spreading the taxable income around so that your income is technically lower. Give some of your assets to your children or make one of more of your children part owners of your business to lower your income tax bracket.

3. Make income into investment dividends. Another savvy way to lower your tax bracket is to restructure your income and investment such that the money you earn gets qualified as capital gains. Over time, capital gains taxes will be lower than the corresponding income tax rate. Speak to a tax attorney about making this move so you can save money over time by entering a lower income tax bracket.

4. Change your business structure. If you have a small business (generally under $75,000 annual income) and are not a general service business such as a doctor, architect or lawyer you can save tax money by incorporating. Otherwise structuring your business as a sole-proprietor business or using an LLC or partnership can also help to technically lower your tax bracket and save you money on your taxes.