Do the recent changes in the law that make the kiddie tax apply to children under age 18 destroy the hire-your-child strategy? (M.T., Santa Fe, NM)
No! The kiddie tax does not apply to earned income; it applies only to unearned income. Thus, the hire-your-child strategy is not affected.
Example. You earn $70,000 in your self-employed business and your spouse earns $70,000 on a W-2 income. You hire your two children, ages 10 and 11, to work ... Log in to view full article.