For business owners, one of the most overlooked tax strategies is not complicated, expensive, or aggressive. It is hiring your own children, legally, for real work, at a fair wage.
How This Strategy Actually Works
When a business owner employs their child for legitimate work in the business, age appropriate tasks, actual hours worked, and a reasonable wage for that work, the wages paid can be a legitimate deductible business expense. Depending on the business structure and the child's total income, that income may be taxed at the child's own low or even zero effective tax rate, rather than at the parent's typically much higher rate.
This is not a loophole. It is a long-standing, well established part of the tax code, and it rewards exactly what it sounds like it rewards: genuinely putting your children to work in your business.
Why This Matters Beyond the Tax Savings
The financial benefit is real, but many business owners who use this strategy say the more lasting value is what it teaches. A child who is actually paid for real work learns, firsthand, what earning money involves, and that income creates opportunity, whether that means funding a custodial account, an education savings vehicle, or their very first exposure to saving and investing.
Where Business Owners Get This Wrong
The single most important requirement is legitimacy. The work has to be real, age appropriate, properly documented, and reasonably compensated for the tasks actually performed. This is not a strategy where a business simply writes a check to a child's account without any actual work behind it. Proper documentation, from job description to hours worked to payment records, is what separates a legitimate strategy from something that would not hold up under scrutiny.
Why Business Structure Matters Here
The specific tax treatment of this strategy can vary depending on how your business is structured, sole proprietorship, partnership, S corporation, or C corporation, all handle this somewhat differently. This is exactly the kind of detail that needs to be reviewed with your CPA before implementing, so the strategy is structured correctly from day one, based on your specific entity type.
If you already have a CPA, this is a great, straightforward conversation to bring to them directly. If you do not, we work with tax professionals across all fifty states who specialize in exactly this kind of business owner strategy.
Who This Strategy Fits
This applies almost exclusively to business owners, particularly those with children old enough to perform real, meaningful work, whether that is administrative tasks, social media help, modeling for a business, or other age appropriate roles depending on the nature of the business.
Your Next Step
Our Wealth Blueprint Guide includes a full walkthrough of this strategy, including how to properly document the arrangement so it holds up correctly at tax time.
Download the free Wealth Blueprint Guide and learn how to set up the hiring children strategy the right way in your business.
Get the Guide