Does your business need an extra set of hands? And are you tired of arguing with your teenager about whether or not $50 to unload the dishwasher is a fair trade? If you answered yes to both questions, have we got an idea for you! Just put them on payroll.
Not only will you get some extra help with your business, but hiring your kids could actually lower your business taxes. And unlike some questionable tax advice floating around the internet, this is actually legal … if done the right way.
Put your kids (and your deductions) to work
One of the biggest perks of hiring your children is that you can generally deduct their reasonable wages as a business expense. That means less taxable business profit for you, and actual income for your kid.
Speaking of income, your child may pay little or no federal income tax on those earnings. For 2026, a single dependent whose only income is wages can earn up to $16,100 without owing federal income tax. That can change under certain circumstances or if you add other income.
Now, let’s run the numbers. Say you hire your teenager to manage social media and help with inventory. They work 10 hours a week at $15 per hour for 20 weeks. That adds up to $3,000 in deductible business wages for you, and $3,000 right in their pocket. Not too shabby for a summer job that doesn’t require a fast-food uniform.
Payroll taxes get a family discount
The IRS has special rules for family employees. In qualifying businesses, wages paid to children under 18 are exempt from Social Security and Medicare taxes (FICA). That’s a break for you and your child.
Wages paid to children under 21 are also exempt from federal unemployment taxes (FUTA). Federal income tax withholding rules still apply.
But, as always, there is a catch. These payroll tax benefits apply if your business is:
- A sole proprietorship owned by a parent.
- A partnership in which every partner is a parent of the child.
Corporations (including S corps) do not qualify. Single-member LLCs are often treated differently for payroll taxes, so confirm with a tax professional before assuming the exemption applies.
It sounds like a pretty sweet arrangement, right? But don’t start cutting that check or handing out Employee of the Month awards just yet. We’re dealing with the IRS here, so there are rules to follow.
Learn about what the IRS requires when hiring your child.
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Being your kid isn’t a job qualification
Just sharing your DNA isn’t enough to qualify for a deduction. Your child has to actually work. Unfortunately, being really good at spending your money doesn’t count as a job skill. But filing paperwork, organizing inventory, packing orders, cleaning the office, and managing social media are all legit job duties.
You also have to pay them a reasonable amount. Paying them $15 an hour to restock inventory is probably reasonable. Handing over $10,000 a year to take out the trash once a week is questionable. Wages should be comparable to what you would pay a non-family employee for the same work.
Child labor laws also still apply. Federal rules do have some exceptions for children working in businesses entirely owned by their parents, but hazardous jobs are still restricted. Organizing inventory is one thing. Handing a 14-year-old the keys to a forklift is quite another. State laws may also be stricter, so check those before putting any minor child to work.
Keeping it in the family doesn’t mean keeping it off the books
There are benefits to hiring your family members, but skipping paperwork isn’t one of them.
Your child should be treated just like any other employee. That means completing required hiring forms like Form W-4 and Form I-9, following payroll rules, and issuing a W-2. You’ll also need to keep records of their hours, duties, wages, and payments.
And if you’re worried that earning their own wages will automatically prevent you from claiming your child as a dependent, don’t be. One paycheck doesn’t automatically make your teenager an independent adult, and the regular dependency rules still apply.
Ultimately, the tax benefits of hiring your children can make it a win for your business and your family. You get business tax deductions, your child earns income and job experience, and – bonus! – they might stop hitting you up for $20 every other day.
Just make sure the work is real, the pay makes sense, and your records are in order. They may be your family, but that doesn’t make you exempt from playing by the IRS’s rules.
