Tax Saving 101: Keeping It In The Family – How hiring your children can save you thousands in taxes.

Now is a better time than ever to hire your children. We know, they’re lazy, they barely work, they have smart mouths, but hire them. We’ve all heard of keeping wealth in the family. By hiring your children to do actual work for your company, their income may be a deductible expense for your business. There are some limits and stipulations, but yes you can pay your children to work for you, tax-free!

For business owners, hiring and paying your children within the standard deduction amount per year may qualify as a tax deduction. The deduction amount is capped at $12,000 per year or $1,000 per month. Now is an especially good time to make your children employees as the income limit was raised with recent tax reform. Therefore even if your business does not bring in a great amount of revenue this tactic allows you to cut expenses. If your business is small, this may work more in your favor than it would for a larger business.

The government’s reasoning behind these tax laws is that the probability of a person’s 18 and under children suing them for injuries or other discrepancies is relatively low. The other factor is that most children are already on their parent’s health insurance, leaving no reason for the parents to be taxed on social benefits they already provide.

These rules only apply to children under 18. Once your child turns 18, consult with a trusted CPA about how to proceed legally and still get the biggest tax benefit.

Every penny counts, and at Madison’s Accounting and Tax Service, we want to make sure every client has the knowledge and resources to benefit from any tax breaks possible.

https://www.nolo.com/legal-encyclopedia/why-its-tax-smart-hire-your-children.html

https://www.entrepreneur.com/article/334852