Paying your kids has tax and educational benefits
As a business owner, we are always looking for ways to improve our company, save taxes, and ultimately help our bottom line. Did you know that paying your own kid in your business can be beneficial tax wise and can be used as an educational tool? You can legally pay your own kid without having labor laws come into play. So what are the benefits of paying your kid through your business?
- Tax Savings – You can pay them and shift that income from you to them either tax free or at a lower rate depending on what type of entity your business is and how much payroll you choose to pay them. This is done through payroll and the kid is treated just like any other employee. Doing payroll to your minor child or even a child in college can save a nice amount on your taxes.
- Money Lessons – By paying them through your business, you are able to teach them about how to handle money. This is important to teach your kids as early as you can. Having their own money they earned is a great tool to help you give them lessons on saving, giving, and spending. This will help them later in life with their finances and will help keep them from having to struggle to knock out debt.
- Work Lessons – Having your child work in your business can help them develop good work habits. It will help instill in them that they need to work for their money to pay for savings, giving, and spending. After all, that “must have” toy they have their eye on will seem so much more their own if they had to pay for it themselves from a hard days work. Make sure that they have clear tasks and duties for the business. This will help your kid see what you do for a living and also see if that is something they might like to do for a career.
- Retirement Account – By paying your kid, they will have earned income which is a requirement for them to be able to contribute to an IRA should they so desire as part of their Money Lessons.
As you can see, there are various lessons to be learned and tax savings through paying your kid and it is beneficial for you and them both. We would love to help you save on your taxes by helping you come up with the right payroll for your kid. If you have questions on how much to pay, how much you could save, or anything related to paying your kids and the lessons to be taught about money please contact us.