10/20/2026
💰 TAX TIP TUESDAY 💰
Most parents save money FOR their kids. 👨👩👧👦
But financially savvy business owners?
They bring their kids INTO the family business… and potentially save thousands in taxes while doing it!
Let me explain. 👇
For 2026, the standard deduction for a single taxpayer is $16,100.
That means if you hire your child to perform legitimate work in your business, you may be able to pay them up to $16,100 per year without them owing federal income tax!
Here's where it gets good…
👉 Your business: Deducts $16,100 in legitimate wages. If you're in the 35% federal tax bracket, that could mean approximately $5,635 in federal income tax savings, before considering other tax factors.
👉 Your child: Could owe $0 in federal income tax on those wages if that's their only income.
👉 The payroll tax bonus: If your child is under 18 and works for your sole proprietorship or a partnership owned exclusively by their parents, their wages are generally exempt from Social Security and Medicare taxes!
Now here's where it gets REALLY interesting… 👀
BUILD THEIR FUTURE WEALTH! 📈
For 2026, the Roth IRA contribution limit for someone under 50 is $7,500, provided they have sufficient eligible earned income. Imagine taking $7,500 of your child's earnings each year and investing it in a Roth IRA.
💵 $7,500 invested annually
📅 10 years of contributions, from ages 15 through 24
💰 $75,000 total invested
📈 Assuming an average annual return of 8%, that money could potentially grow to approximately $2.5 MILLION by age 65!
And with a Roth IRA? Qualified retirement withdrawals are completely TAX-FREE! 🤯
Think about what you just accomplished…
✅ Potentially saved thousands in business taxes.
✅ Helped your child build long-term financial security.
✅ Taught your child valuable work skills.
✅ Kept more money working for your family instead of going toward taxes.
And if you have multiple children legitimately working in your business? The potential tax savings could be even greater!
BUT WAIT! THERE ARE RULES! ⚠️
You can't just put your kids on payroll and call it a day.
✔️ They must perform REAL work for your business.
✔️ Their pay must be reasonable for the work performed.
✔️ You need proper documentation, payroll records, and tax reporting.
✔️ The payroll tax exemption does NOT generally apply to corporations, including S corporations.
Social media management, administrative tasks, organizing files, photography, marketing assistance, and other age-appropriate business activities may qualify. The key? The work and compensation must be legitimate!
Most parents think:
"I'll save money and give it to my kids when they're older."
Smart business owners think:
"Why not teach my kids how to earn money, save on taxes, AND help them build wealth at the same time?"
Same goal. Smarter tax planning. 💡
Not every business qualifies for the same benefits, and the details matter!
📲 Own a business and want to know whether hiring your children makes sense for your 2026 tax strategy?
Contact Legacy Tax Group and let's make sure you're taking advantage of the tax saving opportunities available to your family!
