Hire Your Kids Tax Strategy.

Running a small business comes with plenty of challenges, but it also opens the door to some tax-saving strategies. One of the most overlooked? Putting your kids on payroll.

Hiring your children isn’t just a way to pass down a strong work ethic—it can also help you reduce your tax liability and keep more money in the family. Here’s how it works.

When you hire your child to work for your business, you can pay them a reasonable wage and deduct it as a business expense. That means:

• You lower your business’s taxable income and

• Your child likely pays little to no tax on what they earn.

For 2025, the standard deduction for a single filer is $14,600. If your child earns less than that, they won’t owe federal income tax.

This strategy is especially effective if:

• You’re a sole proprietor or single-member LLC 

• You can give them meaningful, age-appropriate work (filing, cleaning, marketing help, social media, etc.)

If your business is a sole proprietorship or single-member LLC, and your child is under 18:

• No Social Security or Medicare taxes are required

• No federal unemployment tax (FUTA) either

If your business is taxed as an S Corp or a partnership (with non-parent partners), these taxes may apply

What the IRS Wants to See

As with anything tax-related, there are a few boxes you need to check:

• The work must be legitimate. No paying your 6-year-old $10,000 to be a “brand ambassador.”

• Wages must be reasonable. Pay them what you’d pay a third party for the same work.

• Document everything. Time sheets, job descriptions, payment records, etc.

• Pay through payroll. 

Hiring your kids is a legit tax strategy that keeps money in the family, teaches real-life skills, and builds generational wealth. Just make sure you do it the right way—documented, reasonable, and IRS-compliant.

Not sure where to start or if your business qualifies? Contact us today.