Business Owners: Hire your minor children!! Here’s why…

Raising children is expensive especially in this economy but it just got easier if you employ your minor children  Doing this will reduce your taxable business income while allowing them to earn tax-advantaged income.  It’s never been easier.

Here’s how to do it:

Employ your minor children in your business (e.g., for shredding, cleaning, filing, or data entry):

• Document the Job: Create a written agreement detailing your child’s responsibilities, hours, frequency, and pay. Pay a reasonable wage (not excessive); minimum wage is not required.

• Track Work: Maintain a log of days, hours, and tasks performed to substantiate the expense.

• Pay by Check: Issue checks to your child for work performed to document payments.

• Tax Benefits:

  • No Social Security, Medicare, or state taxes are required.

  • Your child can earn up to the federal standard deduction (in 2025 that’s $15,000!) without owing federal income tax.

  • In NJ, income above $10,000 is taxed at 1.4%. If they earn $15,000, they owe $70 state tax on $5,000.  Other states vary and some states have no income tax at all.

• Business Savings: Deduct up to $15,000 as a business expense which avoids self-employment tax (15.3%) and income tax at your bracket on your net profit. This shifts expenses to pre-tax dollars, as business deductions are not taxed.

Note: No payroll setup required. Verify compliance with child labor laws (e.g., no hazardous work for under 18).

Now your child can use some of that hard earned money for their fun expenses like movies, games, outings and start a savings and maybe even a Roth IRA or 529 plan.  BTW, NJ is matching up to $750 if you open a 529 plan.  Contact us for more info on how to do this!