Tax Tip: Put Your Kids on Payroll for Big Savings and Financial Education

Looking for a straightforward tax-saving strategy that benefits both your business and your family? If you have children of working age who can help around the office, consider officially putting them on payroll. This approach can turn your everyday expenses into valuable tax deductions, giving you a significant tax break while fostering financial responsibility in your kids.

How It Works

If your children are old enough to help with tasks like filing, organizing, or other small jobs, you’re probably already spending money on their needs—clothes, school supplies, gadgets, and more. By hiring them for real work, you can make these expenses deductible for your business while keeping the earnings within the family, usually with little to no tax owed on their part.

The Tax Benefits

1. Reduce Your Business’s Taxable Income: By paying your children a salary, you reduce your business’s taxable income, lowering your overall tax bill. Depending on their age and the hours they work, you could potentially save $5,000-$7,000 per child each year.

2. Savings Add Up: For families with multiple children, this can translate to substantial savings. If you have three kids on payroll, you might save between $15,000 and $20,000 in taxes annually—without any extra out-of-pocket spending.

   
   

Financial Education for Your Kids

Beyond the tax benefits, putting your kids on payroll can give them invaluable hands-on financial education. Let them earn their own money for some of the items they want and manage their spending. Here’s how to make the most of this opportunity:

• Teach Budgeting and Financial Responsibility: Sit down with them monthly to review their bank statements. Show them how the money they earned flows in and how their spending choices impact their balance.

• Understand the Value of Money: By seeing how quickly money goes when spent on things they want, kids gain a practical understanding of earnings, savings, and budgeting—lessons they won’t get from textbooks.

  
  

Key Takeaway

Hiring your kids not only helps with tax savings, but it also equips them with essential life skills. This approach is a win-win, saving your business money while teaching your children the basics of financial responsibility.