Employing Your Children For Tax Advantages
In today’s world, taking advantage of tax rules is a popular way to increase one’s wealth. One of the more creative ways of doing so is employing your children. There are multiple tax-related advantages to putting your kids on the payroll.
If your child works in your business, they must be on your payroll for the services they are performing. You can't just transfer money to them and write it off. Your child must be providing services. Some examples of services would be: filing, cleaning, data entry, filming marketing videos and helping create marketing content.
The Department of Labor's rules for employing minors should be reviewed before considering the perfect job for your child.
The biggest tax advantage of having your children on payroll is the ability to transfer income from your higher tax bracket to their lower one. This can produce substantial long-term savings for your family.
I personally advise my clients to open up a Roth IRA for their working children. Children with earned income can max out their Roth. Their future self will thank you!