💸 Business tax breaks worth a double take

The Basics

👨‍👩‍👧 Why you should hire your kids (and no, it’s not free labor)

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: 

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 you hire your child

The Strategy

🚜 Don’t wait years to write off your business equipment

Buying new equipment for your business is expensive enough, and waiting years to deduct the cost adds insult to injury. Fortunately, 100% bonus depreciation is back, so you can deduct the full cost of eligible equipment upfront.

The wait is over for some equipment

Business equipment is typically depreciated over five or seven years. Think of it as getting your tax deductions in installments rather than all at once. 

But thanks to the One Big Beautiful Bill, 100% bonus depreciation is permanently restored for qualifying property acquired and placed in service after January 19, 2025. 

So, if your bakery purchases a qualifying $8,000 commercial mixer in 2026, you could deduct the entire $8,000 that year instead of spreading it out over several years. That’s what we call a pretty sweet deal.

What equipment gets the VIP treatment?

Bonus depreciation for small businesses can apply to machinery, computers, office furniture, and other qualifying assets with depreciation periods of 20 years or less. 

And here’s another perk: used equipment may qualify, too. So, go ahead and pick up that secondhand bargain – it may come with a tax break if it meets the IRS’s requirements. 

But before you start filling your shopping cart, remember: 

Also keep in mind that this isn’t the IRS shouting, “YOU get a free mixer. And YOU get a free mixer.” A deduction isn’t a refund – it reduces your taxable income, not your tax bill dollar-for-dollar. Accelerating deductions may also affect future taxes, and state rules may differ. 

Ultimately, bonus depreciation can help you score bigger deductions without waiting it out. Just keep your purchase records, verify eligibility, and consider talking to a tax professional before planning that business shopping spree. 

The Deep Dive

💰 Qualified business income: the tax break hiding in plain sight

Most business tax deductions require you to spend money first – new equipment, office supplies, printer ink that costs more per ounce than Chanel No. 5. But there’s a way to claim a tax break just for earning money. Meet the qualified business income deduction.

There’s a tax deduction just for making money

Also known as the QBI deduction or Section 199A, the qualified business income deduction allows eligible business owners to deduct up to 20% of their qualified business income. That’s usually your net business income after expenses, not your total sales. This deduction became permanent as a result of the One Big Beautiful Bill. 

Here’s what it looks like. If your business earns $50,000 in QBI, you could potentially deduct $10,000 from your taxable income. That doesn’t mean you’re pocketing $10,000 in free money from the IRS (you know better than that). But it does mean it can lower your tax bill. 

While it’s not handing over a wad of cash, the IRS does throw in another pleasant surprise. You can claim the QBI deduction even if you take the standard deduction – no itemizing required.

Not every business qualifies

Of course, the IRS isn’t just handing out deductions to anyone with a business card. Sole proprietors, partners, and S corp shareholders may qualify. But regular W-2 wages and C corp income won’t count. 

For 2026, the rules are pretty straightforward if your taxable income is $201,750 or less (or $403,500 for married couples filing jointly) – you may qualify for the full 20%. If you earn more than that, restrictions gradually kick in. Once your income exceeds $276,750 ($553,500 for joint filers), certain service businesses, like consulting and law firms, lose the deduction entirely. Other businesses may face additional limits based on employee wages and business property. 

Starting in 2026, eligible business owners with at least $1,000 in qualified business income from businesses they materially participate in may qualify for a minimum $400 deduction. Beginning in 2027, this will be adjusted for inflation. 

You don’t need to buy new equipment, hire another employee, or buy more office supplies than you’ll use in a lifetime. Sometimes the smartest tax move isn’t spending more money. It’s knowing which tax breaks are yours for the taking.