Working moms and dads generally spend a significant amount of money on child care while they work/run their business. Why not be able to save additional money while trying to do both?
Here are 5 reasons to hire your child!
Is your child able to dust, file, check inventory, model your products, etc.? If your answer is yes, you might be able to save money by hiring your child. You can instill fundamental work ethics and spend more time with those you love most in the world. It is a win-win!
1. You can pay less in taxes.
Generally speaking, if you are an LLC or Sole Prop and your child is under 18 you may not have to pay social security or Medicare taxes for payments under $12,000 to your child.
2. Your child can earn up to $12,000 per year without paying any taxes.
If your child’s only job is working for you and they don’t make more than $12,00 per year, they should qualify for the standard deduction and have ZERO tax liability. Most likely they will not be required to file a tax return.
3. Take a $12,000 deduction.
As long as you can validate your claim for payment and they are preforming reasonable work, you can take the deduction on your tax return.
4. Put Away $100k into a Tax Free 529 College Savings Fund
You can actually take back what you paid them and put it into a 529 tax free. If your child can start filing papers or cleaning your office as soon as they are of age to perform the task given, you can start saving for college. For example, if you had your child start cleaning your office at 10yrs old and they did this until they were 18, that is 8yrs of $12,000per year totaling $96,000 you could have them put into their college fund!
5. Developing work ethic to sustain long term goal attainment
Giving a child a job can teach them the importance of commitment and continued responsibility, which in turn, can develop into a natural “ tendency to sustain interest in and effort toward very long-term goals.” (Inc. 7 Science-Backed Things You Must Do to Raise Successful Kids”) Children are growing up in an age where everything is about instant gratification. It is important to teach them how to move beyond the now and look to the future.
You work hard to be the best you can be for your business and your family, it’s time for you to get rewarded for all your hard work. Talk to your tax preparer today!
***Your state’s regulations may vary, so be sure to talk to your accountant to make sure all of these benefits can apply to your situation.***