Is Hiring Your Child Right for Your Business?
Tax Tip:
Hiring your child to work in your business could mean tax breaks for both of you. Owners of certain noncorporate entities can hire their under-age-18 children as full- or part-time employees, and the children’s wages will be exempt from the following federal payroll taxes: Social Security tax, Medicare tax and federal unemployment tax (the federal unemployment tax exemption applies to those under age 21). Payments for services of your child are still subject to income tax withholding, regardless of age or entity type.
In addition, your dependent employee-child’s standard deduction can shield from federal income tax up to $15,750 of 2025 wages. You’ll get a business tax deduction for the child-employee’s wages, which will reduce your income taxes and your self-employment taxes.
Hiring your child can be a tax-smart move, but the pay must be reasonable for the work performed. Also, maintain the same records (such as timesheets and job descriptions) as you would for other employees to substantiate the hours worked and duties performed. Issue your child a Form W-2. Contact us with questions about how these rules apply to your situation.
This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.
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