What could be better than cutting your annual tax liability using the IRS’s own tax codes? (IRS Form 8814 and Form 8615)
What about the added bonus of helping your child develop a strong work ethic, limitless thinking, and the value of being an entrepreneur? All while they earn some spending money AND start saving for college or that first business. And it’s all tax-free.
But we have found that with our clients (successful business owners with an average personal income of over $500,000), the hardest part is not the actual hiring, that’s easy with a little guidance… It’s finding legitimate jobs and services, that can be paid at standard and comparable rates.
Well, we have compiled a list of 32 different “jobs” you can have your children perform for your business. The best part is, these services can carry a very high earnings rate.
You don’t have to pay “sub wages,” or pay tax on helping your child learn valuable work ethics.
As long as they’re doing legitimate work for your business, you can hire your child and pay them up to $14,600 per year tax-free (up from 2023’s $13,850.
If they stay under this limit, they usually don’t even have to file a tax return, which means they don’t pay any income tax on it. And you get to deduct their wages, which lowers your business’ taxable income.
IMPORTANT DISCLAIMER: While this article uses the education garnered from years of client work and our extensive network of CPAs, lawyers, and advisors, please take this article and the PDF to your accountant or Wealth Factory advisor to implement a solid plan to legitimately lower your tax liabilities. This is not intended to be advice from a CPA or client advice. This article is meant to arm you with suggestions that many will overlook.
Example: Let’s say you have 3 kids, and you hire two to work in your business.
Using this strategy, rather than just “handing over money” or allowance you likely paid personal taxes on, you’ve moved those taxable dollars from your tax rate, to your child’s tax rate and bracket, which in most cases, is zero, and you still keep the money in the family.
This is called “Tax Bracket-Shifting.”
In the above example, you could have lowered your personal income by up to $24,000, all while teaching your family some well-timed lessons.
I’m using this strategy right now with my two boys. As I’m writing a finance book for kids, I’ve hired them to read it and give me feedback. It has been worth every penny!
I’ve had clients who were dentists pay their kids to model for photographs to be used on their website or brochure. It’s easy to document an “image agreement” that pays a licensing right ongoing.
While this may seem “old hat,” many business owners hire younger children for janitorial duties.
There are countless jobs kids can do for you, and remember, you can pay them at the SAME RATE you would pay any other employee or outsourced company.
Note: For the complete list,
download your copy of the complete PDF
This is just a small start…
The options are virtually limitless, but to avoid IRS scrutiny, make sure it’s a job that’s age-appropriate and your child can do sufficiently.
If your kids are like mine, they are going to love getting their hands on some spending money.
But more importantly, the money will mean much more because they earned it!
You’re the parent, so it’s smart to make sure that the money isn’t all spent on video games and mobile apps. (the first couple checks usually get tossed to the wind, but after that, help them buckle down)
Remember, because this is an ongoing job, at just $14,600/yr, that’s $1,216/mo. For younger kids, this can add up quickly.
Your children can put most of their money in a college savings account, which helps them learn the value of saving. You could do the same, or even help them start what I call a Wealth Capture account, which is an automatic savings account where money is put aside to invest or start a business one day.
Use this strategy wisely, and you’ll give your children a valuable head start on life.
Build the life you love,
Tom and the builders @ Wealth Factory
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I really love this resource!
One of the best ways to help build generational wealth is to engage your children in your business in a way that sets them up to feel the difference they make by helping.
I love encouraging children to make great quote graphics.
Many of the tasks that can be sourced to virtual assistants can be sourced with your teenage family members, such as going through your blog posts to pull out tweetables, fact checking, or administrative actions such as checking your site to ensure all the links still work.
These are both mindset and real skills training. Win, win, win … all around.
I regularly hire my 12 year old son. He has set up my social media accounts, does some Photoshop, animation, etc. for me. I will also hire him to help when I start doing podcasts and webcasts. He's one of my go-to techies! I have a younger son who will be helpful in other ways. He is my target audience for a product I am developing so I will hire him to get feedback on the product. Both kids get an allowance for regular weekly chores around the house, and are expected to pitch in for other household functions. They get hired on top of their allowance to do projects/tasks for my business and they love having the extra money! They also get a choice to do it or not. My oldest son, especially, is aware that I can always go to an outsourcing site to get the work done as well. I give him right of first refusal for those tasks I think he is capable of doing.
My children are all grown now but when they were younger we were able to hire them for many jobs at the farm. We also had them mowing lawns, painting, and all sorts of minor projects at our rentals. My son is very mechanically inclined so I taught him everything I could and he did most of our mechanical work, in fact he now owns his own mobile mechanic business. Some of the contractors I work with would even let them do small jobs when they were working on my properties, which taught them skills I couldn't, I'd pay them and the contractors would give me break on labor. I also had them help with book work, finances and even sit in on the occasional contract negotiation or business meeting so they could get the feel for that end of the business as well.
I rehab houses for buy/hold (rentals) and flips. I hired my 21 year-old daughter majoring in Advertising to build my company website and Facebook account. Each time I have pictures to add or need to make updates, she takes care of it. I pay her $500/month. Initially we thought it would be a win-win because I needed the help, and she needed to put something creative on her resume. A few weeks ago, she was offered an internship with an Ad Agency specifically because of this!
I also hire my 17 yr old son to do demo, yard work and hang lights. For now I pay in tanks of gas and food :)
I hired my son when he was 13 as a W-2 employee for my business. He is now 16. He helps me with social media tasks for my business on Facebook, Instagram and Pinterest. He helps with invoice filing, takes out the recycle and any other time-saving task to allow me to focus on higher end tasks. Recently, he has been given a larger task - to create his own Amazon business (he showed an interest and requested this when seeing my results). He is taking the Amazing.com Amazon private label business course and will be using the money he is earning/has earned from my business to pay for his business expenses and inventory to get the business off the ground.