Summer is here, and while most kids are gearing up for lazy afternoons and trips to the pool, savvy business owners have something else in mind—turning summer into tax savings.
If you’re a small business owner, here’s a smart move you might not have considered: hire your child to work in your business. Not only does this teach them financial responsibility and work ethic, but it can also put real money back in your pocket.
Let’s break it down—using clear examples, solid IRS rules, and a sprinkle of summer magic.
Meet Bob: The Lamp Mogul with a Tax-Savvy Plan
Bob runs a thriving lamp design business in Northern Virginia. He also has a 15-year-old daughter, Mia, who’s interested in graphic design. This summer, instead of letting Mia spend her days glued to Netflix, Bob hires her to help with product photography and social media content.
Sounds like a parenting win? It’s also a financial one.
By hiring Mia:
- Bob pays her a fair wage from his business account.
- The business gets a tax deduction for her wages.
- If Bob’s business is unincorporated (a sole proprietorship or partnership with a spouse), and Mia is under 18, no payroll taxes apply.
- Mia can earn up to $15,000 in 2025—and pay zero federal income tax.
Why It Works: A Look at the IRS Playbook
The IRS allows business owners to deduct reasonable wages paid to employees—including their children—as long as:
- The child is doing legitimate work.
- The wage is comparable to what you’d pay another employee for the same task.
- You document the hours and payments just like with any employee.
When your child earns income, it’s taxed at their rate—not yours. That shift of income lowers your self-employment tax and overall taxable income.
Bonus: In an unincorporated business, kids under 18 aren’t subject to Social Security or Medicare taxes. That’s a 15.3% payroll tax dodge—totally legit!
Supercharge the Savings with an IRA
Now let’s crank this strategy up a notch.
If your child earns, say, $22,000, they can:
- Contribute $7,000 to a traditional IRA and owe no federal income tax.
- Or, choose a ROTH IRA, pay a little now, and let that tax-free growth ride for decades.
Imagine a 15-year-old socking away money into a Roth IRA—by the time they’re 65, that could turn into hundreds of thousands of dollars.
It’s like planting a financial seed that grows into a forest.
But Wait—What About Investment Income?
Good question. If your child also earns investment income (think dividends or interest from savings or stocks), be cautious. The “kiddie tax” rules might apply. This means their unearned income could be taxed at the parents’ rate after a certain threshold.
It’s not a dealbreaker, but it’s worth chatting with a tax pro (hey, that’s us!) to make sure everything’s structured properly.
Real Numbers, Real Results
Let’s compare:
| Scenario | Without Hiring Child | With Hiring Child |
| Parent Net Income | $100,000 | $85,000 |
| Income Tax (Est.) | ~$21,000 | ~$18,000 |
| Child’s Tax | $0 (standard deduction) | $0 |
| Payroll Taxes on Child | N/A | $0 (if under 18 & unincorporated) |
| Retirement Savings | N/A | Up to $7,000 in IRA |
| Total Family Tax | ~$21,000 | ~$18,000 |
| Total Savings | — | ~$3,000+ |
Multiply that by a few years and you’ve just paid for college—or at least their first car.
Watch: How Hiring Your Child Can Save You Thousands in Taxes
In under 2 minutes, we explain exactly how to structure the setup, avoid IRS red flags, and keep more money in the family.
Is This Right for You?
This strategy isn’t just for family-run bakeries or TikTok-savvy teenagers. It works for law firms, dental practices, home healthcare providers—even consultants working from a laptop in McLean.
That said, there are a few things to keep in mind:
- You must document the work and pay.
- The wage must be reasonable.
- The child must actually do legit work (no “paper-shuffling intern” roles just for tax perks).
- Incorporated businesses (S-corps, C-corps) can still benefit, but payroll taxes do apply.
JS Morlu’s Take: Proactive Planning, Maximum Savings
At JS Morlu, we’re big fans of smart, proactive tax strategies. We work with business owners, professionals, and high-net-worth families across Northern Virginia and beyond to make sure every dollar works harder.
Hiring your child isn’t a gimmick. It’s a tested strategy backed by tax code and long-term financial logic. Done right, it teaches your kids responsibility, helps them save, and reduces your overall tax burden.
That’s the kind of win-win we like to see.
Ready to Put This Strategy to Work?
Our tax planning team can walk you through exactly how to set it up—step by step.
📞 Schedule your free consultation
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