Hiring your kids for summer or holiday jobs isn’t just a parental power move. It’s a savvy business strategy that screams “tax savings!”
On-the-Job Experience
First off, when you hire your kids, you’re not just giving them chores, you’re offering real, resume-building jobs. Imagine your child saving for college or learning money management while filing papers or managing your social media. Yes, even TikTok counts. And the best part? They actually have to listen to you… because it’s the job!
Tax Perks Galore
Ok, so you get some extra help with your business by telling your kids what to do. Are there any tax benefits…. You betcha! Let’s say you are running your own gig, and you’re in the 37% tax bracket. Hiring your 16-year-old could save you a cool $3,700 on $10,000 of your child’s wage earnings, thanks to our friend Mr. Tax Deduction. And since your child is smart, but not yet making the big bucks, they may be able to use their standard deduction to keep all their earnings tax-free. It’s like financial magic!
Future Planning
But wait, there’s more! If your kid earns from this summer job, they can start their own retirement savings. Think about it—investing in an IRA at 16? Believe me, they’ll be thanking you at 50. And if your business has a retirement plan, they could be in for even more benefits. Not only will they be learning and earning along the way, but you will be instilling smart saving habits for your children.
Payroll Tax Savings
And it gets better. If you’re running a non-incorporated business, those wages might even dodge Social Security and Medicare taxes. It’s like playing Monopoly but with real money and the IRS says it’s cool. Just make sure your business structure fits the bill, and yes, there’s a checklist for that.
So in the end, hiring your child isn’t just about having them around the office and giving them something productive to do. It’s about:
- leveraging tax benefits
- preparing them for the future,
- and yes, maybe enjoying a little bit of “because I said so” while you’re at it.
Remember to keep everything above board with proper records and forms, there are great tax professionals out there that can assist, because nobody wants the IRS as a surprise summer guest.
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