Building a successful business can be a multi-generational project. What better way to show that than to hire your children and give them a chance to both learn and earn? But there are tax rules (and benefits) to hiring your kids.
The rules
Check the fair labor standards act (FLSA) for your industry. In general, as long as it doesn’t involve heavy equipment or dangerous chemicals, kids must be above 14 years old. 14 and 15 year olds can’t work during school hours or have more than 18 hours a week of work. They also can’t work more than 8 hours per day. Aside from that, these rules matter to the IRS:
- Find a job in your business your children can actually do. If you have a farm, for example, maybe they can pick fruit in the summer. On the other hand, chain sawing trees might be a big ask for your elementary or middle school aged child.
- Chores and domestic work at the house are not eligible for these benefits. They child must work at/in your actual business – doing work related to the operation of your business.
- The child’s wage should be fair for that job type and reasonable. See what the going rate is for that job if you don’t know yet and pay near that level.
- Pay your child the same as if another person were your employee. Don’t short-change your kids.
- Document everything. No money should change hands nor hours be worked without keeping good records.
The Benefits
If you’re a sole proprietor or a partnership in which both partners are the parents of the children, you’re in luck. You won’t have to pay social security, Medicare, or federal unemployment tax when hiring kids under 18 years old. This includes LLCs taxed as sole proprietorships. This means the 6.2% social security, 1.45% Medicare, and 0.6% unemployment the employer normally has to pay for each employee is not a liability to you.
You still have to pay social security and medicare if you are registered as and pay taxes as a corporation, or if the children are 18 or older, however. At age 21, you will have to pay Federal Unemployment Tax (FUTA) of 0.6%.
Regardless of your business entity, you can still deduct the wages you pay your children as business expenses. If you pay $14,000 to each child to help you over the summer and Christmas breaks, that’s $14000 in deductible expenses. If you have three children, that’s $42,000 in deductible expenses!
Your children, unless they have other income pushing them above the standard deduction, most likely won’t even have to file. As of 2025, the standard deduction is $15,000 for singles. Double check with your CPA if your children make income from other employment, investments, or elsewhere that brings their income above that amount.
I may not be your child, but this post has helped benefit both you and your children (or your parents, hello young readers!). As your bookkeeper, I can help you document the things we talked about, as well as help you find more deductions. Most importantly, I can save you over 80 hours per year doing your bookkeeping compared to you doing it all yourself. Schedule a call with me and we’ll talk about how you can better meet your business goals.