Hiring Your Kids

If you run a sole proprietorship, hiring your kids to work in your business has several tax advantages. If you want to discuss this strategy in detail, click here to Book A Meeting. First, make sure the work they are doing and the wage you are paying them is reasonable. If you have a 12 year old making $3,000/week as your CFO, the IRS may have some questions...

Here are some tax advantages of hiring your kids:

1) Business Deduction: All of your employees' wages are also considered fully deductible, including any bonuses and commissions, as long as the payments are deemed ordinary and reasonable for services rendered.

2) No FICA Taxes: For a sole prop, there is no withholding required for Social Security, Medicare, or federal unemployment taxes for kids under 18.

3) No Income Taxes: If your kids earn less than the standard deduction ($14,600 in 2024), they do not have to pay any income tax.

4) Roth IRA Tax Savings: Contribute up to $7,000 into a Roth IRA for your kids from wages earned. These contributions grow tax-free and are withdrawn tax-free in retirement.