Ever considered hiring your children? Ooook, so the hand of the child in the picture is a bit too young, we know! but we couldn’t find a picture of an older child that matched our website colors! 😉 so here is a disclaimer… In order for this tax strategy to work, your child must be capable of performing the work you hire him/her for.
As a business owner, hiring your children can be a beneficial way to get some tax-free dollars (and even contribute to their savings).
Here’s how it works:
Based on the 2022 Standard Deduction, your child can make $12,950 per year without having to file a tax return.
You won’t even have to pay payroll taxes or income taxes as the employer (and parent).
Keep in mind that this only works if you’re a Sole Proprietor or an LLC…
And it doesn’t apply if you operate an S-Corp or C-Corp
However, you can work your way around that by setting up a management company as an LLC or a sole proprietorship…
And then pay a legitimate management fee or expense to said management company.
Here’s how this could look:
Your S-Corp or C-Corp pays your management company (an LLC or Sole Proprietorship) a management fee of $12,400.
Your children are on the payroll at this management company…
And you then disperse the $12,400 income to your children, causing a non-taxable event.
Once you get behind it, it’s quite straightforward to implement – and your tax advisor can help you figure out the details.
And understanding deductions is just one of many legal strategies you can follow to stop overpaying Uncle Sam.
Want to learn more about this strategy and others? Visit my website stopsharingtheprofit.com
Always on your side,