June 24, 2024

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Hiring your own kids can provide tax breaks for business owners

2 min read

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If you’re self-employed, hiring your kids could provide tax benefits — provided you follow labor laws and IRS rules, experts say.  

Small businesses hiring their own children is a popular topic among social media influencers on platforms such as TikTok, Instagram and YouTube. But tax professionals say they are often battling misinformation from such posts.

“Most of the videos on TikTok have a kernel of truth to them, but they’re embellished or it only makes sense in very specific situations,” Matt Metras, a Rochester, New York-based enrolled agent and owner of MDM Financial Services, previously told CNBC.

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“But when you have a 60-second video, you aren’t trying to convey that nuance,” Metras said.

If you’re planning to hire your children this summer, here are some key things to know, according to financial experts.

Employing your kids can be ‘tax-savvy’

“Hiring your child can be a tax-savvy move,” said certified financial planner Sean Lovison, founder of Philadelphia-area Purpose Built Financial Services. “Their wages can be deducted as a business expense, which can lead to significant savings for your small business.”

For 2024, the federal standard deduction for single filers is $14,600.

“If your child’s income falls within the limits, they may not owe any income tax, which can be a win-win,” said Lovison, who is also a certified public accountant.

Plus, payments to children may avoid Medicare and Social Security taxes, depending on the child’s age and your legal business structure, according to the IRS. 

If your child’s income falls within the limits, they may not owe any income tax, which can be a win-win.

Sean Lovison

Founder of Purpose Built Financial Services

Once your child has…

2024-05-27 09:00:00

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