Page 1: Introduction to Hiring Your Kids
If you own a business, hiring your kids can be a great way to save money on taxes and teach them about responsibility. This strategy is called “hiring your kids: tax-smart family payroll strategies.” In 2025, more families are using this approach to cut costs and keep more money in the family. But there are rules you must follow to do it the right way.
When you hire your children to work in your business, you may be able to avoid paying certain taxes. Plus, your child can earn money without paying as much tax as an adult. This can help you reduce your total family tax bill. It’s a win-win: your business gets help, your child learns useful skills, and your family pays less to the IRS.
Who Can Use This Strategy?
This approach works best for parents who run a sole proprietorship or a partnership where both partners are parents of the child. It’s harder if your business is a corporation, but still possible with planning. If your child is doing real work and being paid fairly, you can use these tax-smart family payroll strategies legally.
What Kinds of Jobs Can Kids Do?
Children can do many tasks depending on their age. Younger kids might shred papers, organize files, or clean the office. Teens can help with marketing, run errands, update websites, or even manage social media. Just make sure the work is real and matches their age and ability.
Page 2: The Tax Benefits of Hiring Your Kids
The biggest benefit of hiring your kids: tax-smart family payroll strategies help lower your taxes. Here’s how it works:
- No Payroll Taxes for Some: If your business is not a corporation and your child is under 18, you don’t have to pay Social Security or Medicare taxes on their wages. If they’re under 21, you also don’t have to pay federal unemployment tax (FUTA).
- Wages Are Deductible: The money you pay your child is a business expense, so it lowers your business income. Lower income means lower taxes for you.
- Your Child Pays Little or No Tax: In 2025, your child can earn up to $14,600 without paying federal income tax, thanks to the standard deduction. If you pay them less than that, they likely won’t owe anything.
- Retirement Savings Option: If your child has earned income, they can open a Roth IRA. You can help them save for the future while they learn about money management.
These are all reasons why more families are using “hiring your kids: tax-smart family payroll strategies” to lower their overall tax bill.
Page 3: Rules to Follow and Mistakes to Avoid
Using these strategies means you must follow IRS rules carefully. Here’s what to do:
- Keep Good Records: Track the hours your child works and what they did. Make sure you pay them by check or direct deposit, not cash.
- Pay a Fair Wage: The amount you pay should be what you’d pay someone else to do the same job.
- Issue a W-2: Even if your child owes no tax, you still need to file a W-2 for them at the end of the year.
- Use a Real Bank Account: Your child should have a real bank account for their paychecks, not just a piggy bank at home.
Common mistakes include paying too much, giving jobs that aren’t real, or not keeping records. These can lead to IRS penalties. It’s smart to talk to a tax professional before starting.
In 2025, families looking to save money and teach kids life skills are finding that hiring your kids: tax-smart family payroll strategies is a powerful option. Just follow the rules, keep it honest, and enjoy the savings!
