Hiring your kid can be a smart money move for both of you. Just make sure to do your due diligence come tax time.
There can be numerous advantages to putting your child on the payroll. Business-owning parents can typically deduct wages paid to that child as an expense. Depending on your business structure and your child's age, you may not owe Social Security, Medicare and unemployment taxes on payments to your young worker either, said certified public accountant John Wheeler, a senior financial consultant with Castle Wealth Advisors in Indianapolis.
"It's a compounding benefit," he said. "Mom and Dad are reducing the taxable income of the business … and are pushing money out of their highest tax bracket into the kid's lowest tax bracket."
Your child, meanwhile, will be receiving work experience along with earned income that could be contributed to an IRA on his or her behalf.
"Up to $6,300, it's all tax-free to them, because they get the standard deduction," Wheeler said.