Why You Should Hire Your Kids
If you have a business, hiring your kids can have a double benefit. It’s a way for your kids to earn some money, and you can deduct their earnings as a business expense. The only caveat is that it has to be a legitimate business, and your kid has to do legitimate work. You can hire your kids under the age of 18 without having to withhold any taxes unless your business is a C-Corporation; and your kids won’t owe any taxes unless they earn more than the standard deduction. All of this, plus you can still claim them as a dependency exemption on your taxes and claim the child tax credit if you’re eligible.
Hiring your kids in your business is a tremendous opportunity to help them understand the value of working to earn money; and if you direct deposit their earning into a checking and a savings account, they can begin to learn sound money management principles. To that end, you could also have them establish a Roth IRA, to which they can contribute a portion of their earnings. A Roth IRA is a great retirement savings vehicle, but it can also be used to pay for college expenses.