If you own a business and have children, the OBBBA just made the popular “hire your child” tax strategy even more attractive starting in 2025.
Thanks to the OBBBA, the standard deduction for a single taxpayer increases to $15,750 in 2025. It will adjust annually for inflation going forward. This means your child can earn up to $15,750 in wages from your business and pay zero federal income tax. This is regardless of whether you itemize or take the standard deduction.
If you’re a sole proprietor or operate a spouse-only partnership, the benefits are even better. Wages paid to your children under age 18 are exempt from Social Security and Medicare (FICA) taxes. Those under 21 are also exempt from federal unemployment tax (FUTA). This allows you to deduct their wages while avoiding employment tax costs entirely.
For example, if you hire three of your children and pay each $15,750 for legitimate work, they owe no federal tax—and you could save thousands by deducting those wages on your Schedule C, lowering both your income and self-employment taxes.
Even if you operate as an S or C corporation (where payroll taxes apply), the strategy still works. While FICA and FUTA taxes are owed, you receive a deduction for those taxes, and your children still owe no income tax on their wages. In one example, a family netted $9,663 in government-paid tax savings after accounting for taxes paid and deductions received.
In short, hiring your children can create a win-win: they earn tax-free income, and you reduce your tax bill.
How We Can Help
Sterling Tax and Accounting is here to help your business with tax planning! Our comprehensive approach to tax planning helps reduce your overall tax liability and keep more money in your pocket. If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.
Learn how to proactively save on taxes by scheduling a call with our tax planning specialists.
Our tax planning, accounting & business services help you stay on track. Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes. We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation. We’re a trusted CPA Firm in Sarasota, Florida. We serve clients all over the US, and proactively work to minimize their taxes.
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