Tax Loophole Alert
Employ your child in your business.
Teach your child a skill and save $1,000s of tax per year!
***Thread***
Employ your child in your business.
Teach your child a skill and save $1,000s of tax per year!
***Thread***
If you own a business and there are jobs your child can do for it, employ them and pay them.
Your child gets to be part of the family business and learn skills.
You get a deduction.
Typically they are in lower tax bracket than you, if they pay tax at all.
Your child gets to be part of the family business and learn skills.
You get a deduction.
Typically they are in lower tax bracket than you, if they pay tax at all.
Example
You hire your 14 year old to send out cold emails and set up sales calls.
You pay an hourly rate, which ends up being $10k per year in wages.
You deduct $10k, which saves you the following:
-Fed Income Tax: 24%
-State Income Tax: 5%
-SE Tax: 2.9%
You hire your 14 year old to send out cold emails and set up sales calls.
You pay an hourly rate, which ends up being $10k per year in wages.
You deduct $10k, which saves you the following:
-Fed Income Tax: 24%
-State Income Tax: 5%
-SE Tax: 2.9%
Your deduction is approx. 1/3 of $10k or $3,333!
Your child takes the standard deduction of $12,200 and pays $0 tax.
Win, win, win, win...
Family time, skill transfer, wealth transfer, tax savings.
Your child takes the standard deduction of $12,200 and pays $0 tax.
Win, win, win, win...
Family time, skill transfer, wealth transfer, tax savings.
Q&A
Q: How much to I pay them?
A: Needs to be market rate. You can't purposely overpay them.
Q: Child labor laws?
A: I'm no expert there, but by understanding is over 16, no limit hour but non-haz, over 14, limited to non-school hours, and under 14, non-haz family businesses.
Q: How much to I pay them?
A: Needs to be market rate. You can't purposely overpay them.
Q: Child labor laws?
A: I'm no expert there, but by understanding is over 16, no limit hour but non-haz, over 14, limited to non-school hours, and under 14, non-haz family businesses.
Bonus - $5M maker!
Have them contribute their earnings to a ROTH IRA.
Have them contribute their earnings to a ROTH IRA.
https://twitter.com/AskForTaxAdvice/status/1309516437136998400?s=20
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This thread above is the type of guidance you want from your tax advisor.
https://twitter.com/AskForTaxAdvice/status/1308489679176708097?s=20
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