Hire Your Children and Watch Your Tax Bill Shrink

Here's one of our favorite tax savings strategies:

hiring your children to work in your business.

Apart from providing them with valuable life experience, employing your children can yield significant tax benefits for your small business. In this article, we will explore the various advantages and considerations of this approach.

Income Shifting: One of the main advantages of hiring your children is the ability to shift income from your higher tax bracket to their lower tax bracket. By employing your children, you can legally divert business income to them as wages. As a result, your business can deduct the wages as a legitimate expense, reducing your overall taxable income. Your children, who may be in a lower tax bracket or even have no tax liability, will be taxed at a lower rate or may even enjoy tax-free income up to certain thresholds.

Deductible Business Expenses: When hiring your children, you can also deduct their wages as a legitimate business expense. This deduction lowers your taxable business income, reducing your tax liability. Additionally, you can deduct the cost of providing benefits such as health insurance and retirement plans for your child employees. These deductions can help lower your overall tax burden while providing financial security for your children.

Skill Development and Education: Employing your children can be an excellent opportunity for their personal and professional growth. As they work in your business, they gain valuable experience, develop crucial skills, and learn about the real world of work. By engaging in family business activities, they can gain hands-on knowledge about entrepreneurship, financial management, and customer relations. These experiences can be incredibly valuable in preparing them for future careers or even to become entrepreneurs themselves.

What kind of jobs can my children do for my business?

Get creative! Your kids are more than qualified to do the following:

- Shred paper

- Run your errands

- Clean the office or building

- Basic file maintenance

- Scan documents, create digital folders

- Painting

- Stuff envelopes or process mail

- Cashier and work the service counter

Hiring your children for your small business can be a win-win situation. Apart from providing them with valuable experience and skills, it offers significant tax benefits for your business. This is one of our favorite tax strategies, but be sure to consult with your tax advisor to determine if this is tax strategy is right for you and your business.