Methods to reduce the tax burden on dividends?

I have enough dividend income that taxes are now significant. Everything is currently reinvested, and I don't plan to start using funds for personal use for another ten years or so. At a high level, it seems I could reduce my tax burden by ~15% if I transferred everything to an LLC taxed as a corporation. However, I’m wondering if there’s a hidden drawback—such as being taxed more when I use the income for something other than reinvestment, or if the costs of maintaining a C Corp would negate the savings. These would be excellent questions for a professional, but I don’t have enough overall wealth to be taken seriously (e.g., “talk to our AI,” “try our community forums,” “sign up for our free intro to investing seminar,” etc.).

At a high level, it seems I could reduce my tax burden by ~15% if I transferred everything to an LLC taxed as a corporation.

In no way shape or form is this possible. In fact, quite the opposite.

There are two types of corporations in the US (for tax purposes) - C and S, each according to the subchapter of the Internal Revenue Code Chapter 1 (26 USC Chapter 1 Sub-chapters C and S accordingly).

You won't be able to use S-Corp, since it is limited to no more than 25% of its income to be from passive sources. Even if you did, it is pass-through, so for tax purposes all the income would end up back on your individual tax return.

C-Corporations are taxed at corporate rate, and then, after you paid your corporate taxes, the distributions would be taxed again at your individual rate. Guess what these distributions are called? Yes, you guessed it right - dividends. Back where you started, except you already paid corporate tax on them. This is called "double taxation", and is the main reason to never ever use C-Corp for anything unless you absolutely have to (for example - can't use S-Corp due to income type or ownership restrictions, and must use a corporate entity).

You mentioned writing off some things as business expenses, but dividends are not a business income. So nothing to write off. As a general rule, it doesn't matter what type of legal or tax entity you are using when it comes to deductions, if you can't deduct something as an individual - you won't be able to deduct it under an LLC or corporation just as well. The opposite is not true - deductions that are not available to corporations are available to individuals. One notable example in this context is capital losses as a deduction from ordinary income.

These would be excellent questions for a professional, but I don’t have enough overall wealth to be taken seriously

If you have enough investments to be concerned about taxes on dividends, I'm sure you can afford a consultation with a tax advisor. These are usually free for the first 30 minutes, and then at most a couple of hundreds of dollars per hour. Would strongly advise against relying on AI or LLMs when it comes to legal/tax matters. You get what you paid for. Tax advisers must be either EAs, CPAs, or Attorneys (CPAs and Attorneys must be licensed to practice in your State, EAs are regulated by the Federal government). No-one else is legally allowed to provide tax advice.

One thing worth considering when discussing dividend taxation is the qualified treatment. If your dividends qualify, they're taxed based on the capital gains rate schedule, and not the regular income marginal rate. That's a significant benefit. See the IRS Pub. 550.

@littleadv addressed your LLC idea very thoroughly.

The best way to avoid dividend taxation, especially if you are just going to reinvest them, is to hold those assets in a tax advantaged retirement account. You do not pay taxes on dividends in a 401k or Traditional/Roth IRA. Obviously the downside is that this money is locked away (except for some very specific circumstances) until retirement.

Keep in mind that you can't do a transfer of assets (ACAT) from a taxable brokerage account to a retirement account. Contributions must be made in cash.

My suggestion would be to:

Obviously they assumes that you can buy those assets in your retirement accounts. But it should minimize the tax impact. Eventually these assets will be worth the same as they would in the taxable account, but you wouldn't have had to pay for the dividends along the way.

You don't give a lot of details about such but are these "qualified dividends"? Such does not generate taxable events until the exceed the threshold value dependent upon your filling status.

If they are from things such as partnerships or REITs (unqualified) then you have a few options:

Take any earned income and invest it in a tax deferred account. Then use these dividends to replace your earned income.

Reinvest in something else that will not trigger taxes such as securities that pay a qualified dividend or only spins off long term capital gains. Most S&P500 funds are excellent at this.