A few tips on this issue:

Select a traditional 401k plan to contribute pre-tax income. These accounts allow you to deposit part of each paycheck before income taxes into a long-term retirement account. Consider riskier international investment or derivative plans for high returns on your pre-tax money.

Employers set 401k withdrawal limits based on IRS guidelines. In general, workers under the age of 59 1/2 may withdraw money from their 401k plans only if they or a family member has large medical bills, to make a down payment on a house, to prevent foreclosure on their homes or to pay for college for a child or a spouse.

You can't have a 401(k) for a child, those are opened by employees through their own employer. You cannot open a traditional IRA for a child unless that child has earnings.
529 accounts might not have federal benefits, but many states are encouraging them by giving small credits or adjustments.

There is very little you can do that will help your tax situation that would involve your child -- even giving the money straight out to the child wouldn't help, as the income it makes (interest and dividends) are at risk of being taxed back at your rate.

Thanks zsikder. That's somewhat helpful. Reader. You're not giving accurate information. My child has a social security number and therefore can have an investment vehicle established (Although type of vehicle i'm not sure about).

Another question. Both my wife and i have secondary income (incorporated business). Can either of us 'hire' our newborn (as laughable as this may seem), and have his entire wage invested pretax (or are we stuck paying social security, medicare, etc associated with regular employees)?

Lastly. Is there a legal minimum age a child can work in a family owned business?

Is this an unusual situation? Perhaps/perhaps not. But taking a month off just to lower our tax bracket seems a poor option if we can shift revenue to our child name for the long term benefit. Thanks again.

Of course your child can have investment vehicles established. But not with your pre-tax money -- a 401(k) requires an employer/employee relationship, an IRA that requires earned income, and you already rejected the 529.

The IRS has closed the door on many family income-shifting options, you aren't the first couple to try.

You can hire your child, but the job description and pay must be reasonable for the age. That will seriously limit what you can do in that direction for the next few years.

Thanks Brain. Sorry. Wasn't trying to be snide with you. Just frustrated with taxes as it seems so hard to get ahead and at the same time keep Uncle Sam from reaching into my pocket.

You do NOT want to put money into your child's name if you are in the middle class. Unless you are making enough money to pay for your kids college education, when you file a financial aid form in the future, any money in your child's name will be taken in full the first year out and they will get much less in aid.

Talk to a wealth management advisor about what to do with "excess" money, but we usually either buy annuities or stock with any extra savings in our name. Yes, you are taxed on it, but its your money and is not held "against" your child. You can also both start ROTH IRA's where you pay tax now, but not when you take the distribution. I am pretty sure you can do both 401k and roth and the limits are not combined.

Best of luck!

Why don't you put some money into a college 529 plan? IRS sent the plans up in section 529 of the tax code. It's possible to get a 13K credit

http://www.savingforcollege.com/intro_to_529s/what -is-a-529-plan.php

"Why don't you put some money into a college 529 plan?"

Were not against the idea. Again, that's not the only goal. Doing it pre-tax was the primary reason for the inquiry.

Thanks for the help everyone. Its fairly clear there is not a vehicle to do this pretax for our boy. We feel like we get to keep 2/5th of what we make.

We'll have to talk further with a 'wealth management advisor.' Might even be better to do this as a trust.

"The IRS has closed the door on many family income-shifting options, you aren't the first couple to try."

That's pretty much it. We'll be looking for a wealth manager. There's got to be a way to slowly transfer wealth without it all getting eaten.

Hire your cute newborn as a model for your company. You can set there cost per shoot or salary. Then you will have an income for you to work with. If you do it as a 1099 then I don't think you have to pay out like you would a normal employee. Anyone see a reason they can't do this