[freedumb2003]

Were you organized as a corporation, or as a sole proprietorship? A sole proprietorship technically doesn't pay any dividends -- so all your income is taxed as income.

In the case of corporate ownership, there may be some regulations that are put in place to restrict how much you can pay yourself in dividends compared to what you pay yourself in salary. You can sometimes get around this by listing family members as shareholders and paying them dividends, too. Just make sure you have little Johnny buy his own school clothes and maybe spring for groceries once a month, if you know what I mean -- it's "his" money, after all.

I had both but it never occured to me to try to reduce my hit there. Good advice for everyone -- thanks

[Alberta's Child]

Of course, you should always check this kind of thing with a tax accountant. These things change from year to year -- particularly with regard to the reduced tax rate on dividends (I believe there is a sunset provision in this tax law that ends the reduced tax rate after 2005 or 2006).