Did you know that you can legitimately hire your kids, no matter what age they are, to work in your business? The IRS Code says you can! As of 2018, each of your children can earn up to $12,000 in tax-free income! Your kids can work, bring home tax-free money, and pay for their own expenses. It’s a great way to teach work ethic, and for the business, benefits like tax strategies. So, I’ll give you the hiring rules and 51 job ideas that allow you to hire your children in your business.
According to the IRS, “Payments for services of children under the age of 18 who work for his or her parent in a trade or business are not subject to Social Security and Medicare taxes if the trade or businesses is a sole proprietorship or a partnership in which each partner is a parent of the child.” Additionally, “payments for services of a child under age 21 who works for his or her parents in a trade or business are not subject to the Federal Unemployment Tax Act (FUTA) tax.” However, “payment for the services of the child are subject to income tax withholding, regardless of age.”
Well, that sounds all fine and good, but what does it mean?
Here’s the sweetest part, though. The new standard tax exemption amount for an individual as of 2018 is $12,000. Therefore, as long as you’re paying each individual child $12,000 or less, there are no taxes due AND you get to deduct their pay as a business expense on your taxes.
Yet, there’s a key to this. Just like we discussed in the previous article about hiring a spouse, you’re not trying to create a fake job with your kids just to shield income taxes. Yes, the IRS allows you to use the tax code to your advantage to lower your taxes, but you want to do it legitimately. You want to utilize the tax strategy properly. Here’s how:
To learn about a “work-around” to paying payroll taxes on your children if you own a corporation, be sure to listen to the attached podcast!
Now that you know how to employ your children properly, let’s talk about what jobs they can do for your business. Realistically, your kids can:
Your kids can legitimately do any of these jobs (and many more), and you can pay them for their work! They receive a tax-free income, and you receive tax deductions. How great is that? Just remember; keep everything legit. Don’t try to scheme the system. Use the strategies that the tax code gives you to teach your kids the value of hard work and to increase your family’s cash flow.
It is always smart to talk to your CPA or your tax advisor before you put any of these ideas into practice. I did my best to give you ideas that are legitimate in every state, but there may be state-specific laws or rules that I am not aware of. If your CPA doesn’t offer you ideas like hiring your kids (or spouse), reach out to me. I work with forward-thinking CPAs all over the country whom I know and trust. I can put you in touch with one of them.
RELATED ARTICLE: Tax and Other Benefits of Hiring Your Spouse