Do you have a business? If not, then do yourself a favor and start one today. Your first business can be the stepping stone to bigger and better things PLUS you’ll save on your taxes immediately.
If you already have a business and also are a parent, then the rest of this blog post is something for you.
You can legally pay your kids for work they do in your business. There is one huge tax benefit here – you get to move income from your tax bracket to theirs. And chances are their tax bracket is 0. That means you’ll save taxes.
I think there is also a bigger lesson too for your children. We did this with our son David when he was 14 years old. He got paid a reasonable wage for what he did, but that was on the high side of reasonable. He also was now responsible for buying his own clothes and for entertainment. We also paid him only monthly. He went crazy the first month! And by the 3rd of the next month, he was broke. He came up to me, complaining that he had no money and he “needed” to go to the movies with his friend Michael.
He didn’t get the money.
The next month, he did the same thing and with the same result. After that, he’s been very careful to put money away and to delay gratification on his spending.
Great lessons for the future!
There are three rules to paying your kids:
- Pay them a reasonable wage for what they’re doing. You can’t pay your 8 year old $100 an hour to empty the trash.
- Have a written job description.
- Keep track of hours worked.
Find your hidden business deductions and make sure your business is getting every break it should. It’s your money. Keep more of it.