Employ Your Kids - and Save

Employ Your Kids - and Save

If you own a small business, hiring your children can be a great way to cut taxes on your income by shifting it to someone who is taxed at a lower (sometimes zero) rate. The main requirement is that family employees must be at least seven years old. Then the first $5,700 of their earned income is not subject to income tax, since that is the current standard deduction for a single taxpayer.

Keep in mind you must pay what is considered a "reasonable" wage for services performed by a family employee. A "reasonable" wage is what you would otherwise pay a commercial vendor for the same service, after making an adjustment for the child’s age and experience. If a landscaping service would charge $20, it’s reasonable to pay your child the same amount since cutting grass is considered to be relatively unskilled labor.

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