Editor’s Note: TCJA tax reform increased the standard deductions which enhances this strategy. Click here for how.
Estimated tax tip savings. Pay your child $8,000, for example, to work in your LLC or sole proprietorship and you could save $3,042. Your exact savings will vary depending on your tax bracket and several other factors.
Children are expensive.
The IRS has a solution to this problem: Put your children to work in your business and make them earn their money. The IRS gives you payroll tax deductions for hiring family members, making this an extremely attractive government subsidy.
You’re in the best position to benefit from this rule if you operate your business as an LLC or a sole proprietorship. If you operate as an S corporation or a C corporation, you can also create tax savings by hiring your child—just not nearly as much.
Since this clever tax-cutting strategy does not apply to everyone—even all husband-and-wife owners—you need to know ... Log in to view full article.