🧭 SECTION 1 — THE 7 PILLARS OF TAX STRATEGY

Almost ALL legal tax strategies fall under these pillars:

1️⃣ Income Shifting

2️⃣ Income Type Conversion

3️⃣ Deduction Maximization

4️⃣ Tax-Advantaged Accounts

5️⃣ Business Structure Optimization

6️⃣ Real Estate Tax Strategy

7️⃣ Long-Term Tax Engineering

Each pillar contains multiple strategies.

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You will master all of them.

 

🟩 PILLAR 1 — INCOME SHIFTING

Income shifting means legally shifting income to:

• Lower-bracket taxpayers

• Lower-bracket years

• Lower-taxed entities

• Lower-taxed forms of income

 

✔ Strategy 1: Hire Your Kids

You can pay your children to:

• Clean office space

• Create content

• Do photography

• Do data entry

• Manage files

• Run errands

• Manage social media

• Assist in operations

 

Paying your child:

• Shifts money from YOUR tax bracket

• Into THEIR tax bracket (often 0%)

• And YOU deduct it as a business expense

 

Kids under 18 working for sole proprietors or LLCs pay:

• No Social Security

• No Medicare

• No unemployment

 

This is incredibly tax-efficient.

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✔ Strategy 2: Income Shifting to a Spouse

If one spouse is in a lower bracket:

• Shift income

• Add them to payroll

• Make them a contractor

• Share business income

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Couples often save thousands doing this.

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✔ Strategy 3: Shifting Income to Future Years

Examples:

• Delay 1099 invoicing to January

• Push commissions to next year

• Receipt of business income delayed

• Real estate closing timing

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Income timing affects:

• Brackets

• Credits

• Eligibility for Roth

• Healthcare subsidies

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Sometimes delaying income saves thousands.

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🟧 PILLAR 2 — INCOME TYPE CONVERSION

There are three types of income, but they’re taxed VERY differently:

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1. Earned Income (Highest Taxed)

• W-2 wages

• Salary

• Self-employment income

• Contractor income

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2. Portfolio Income

• Stocks

• ETFs

• Dividends

• Capital gains

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3. Passive Income

• Rentals

• Royalties

• Limited partnerships

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Tax strategy helps convert earned income → portfolio or passive income, which are taxed much lower.

 

Examples:

• Long-term capital gains = 0%, 15%, 20%

• Qualified dividends have preferential rates

• Rental income can be offset by depreciation

• Passive income is NOT subject to payroll taxes

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This is why real estate and investing are in every wealthy person’s toolbox.

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🟦 PILLAR 3 — DEDUCTION MAXIMIZATION

This pillar uses the strategies from Step 4bc, but now we strategically combine them.

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✔ Strategy: Stack Above-the-Line Deductions

Examples:

• Traditional IRA

• HSA

• Self-employed health insurance

• Self-employed retirement plans

• Deductible business expenses

• Half of self-employment tax

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These reduce AGI, which unlocks:

• More credits

• More deductions

• Lower brackets

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✔ Strategy: Deduction Bunching

Alternate years for:

• Charitable contributions

• Medical expenses

• Property taxes

• Mortgage interest

• SALT deductions

One year you exceed standard deduction → itemize.
Next year → take standard.

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This saves families tens of thousands over a decade.

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✔ Strategy: Business-First Spending

Before buying something personally, ask:

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“Can this be used for the business?”

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Examples:

• Laptop

• Phone

• Internet

• Travel

• Courses

• Vehicle use

• Equipment

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Business expenses are deductible.
Personal expenses are not.

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This mindset saves thousands.

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💼 PILLAR 4 — TAX-ADVANTAGED ACCOUNTS

These accounts are designed by Congress to give tax breaks:

• Traditional IRA

• Roth IRA

• 401(k)

• Roth 401(k)

• SEP IRA

• SIMPLE IRA

• Solo 401(k)

• HSA

• 529 College Plans

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Each serves different goals.

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✔ Traditional Accounts → LOWER taxes now

Contribute → save taxes today.

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✔ Roth Accounts → ZERO taxes later

Contribute → pay nothing in retirement.

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✔ HSA → Triple tax-advantaged

Contribution: Deductible
Growth: Tax-free
Withdrawals: Tax-free for medical

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✔ Solo 401(k) (Business Owners)

One of the most powerful accounts in existence.

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You can contribute:

• As an employee

• As the employer

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This maximizes deductions and accelerates retirement.

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🧱 PILLAR 5 — BUSINESS STRUCTURE OPTIMIZATION

Your business structure determines:

• Payroll taxes

• Self-employment taxes

• What counts as deductible

• How income flows

• How much you keep

 

✔ Sole Proprietor (Default)

Simple, but highest tax burden.

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✔ LLC (for legal + flexibility)

Same taxes as sole proprietor, but creates distance between personal & business.

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✔ S-Corp (Power Strategy for $50k+ profit)

You split your income:

• Part W-2 salary

• Part distribution

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The distribution portion is NOT subject to self-employment tax, which saves:

👉 $6,000–$18,000 per year on average.

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This is a MAJOR tax strategy.

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🏡 PILLAR 6 — REAL ESTATE STRATEGIES 

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This pillar includes:

• Depreciation

• Bonus depreciation

• 1031 exchanges

• Deducting rental expenses

• Home office for landlords

• House hacking

• STR tax advantages

• Capturing passive losses

• Offsetting income with real estate

• Multi-unit property optimization

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This pillar is so large that it becomes its own mini-course later.

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(We will expand these 100x when we get to them in the Real Estate Sections.)

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🧠 PILLAR 7 — LONG-TERM TAX ENGINEERING

This includes:

• Roth conversion ladder

• Zero-percent capital gains years

• Multi-year income planning

• Planning income drops for tax-free conversions

• Selling assets strategically

• Timing real estate sales

• Planning for retirement

• Minimizing RMDs

• Asset location optimization

• Filing status planning

• Inheritance and legacy planning

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This is not tax preparation.
This is tax architecture, and wealthy people use it every year.