Up to $12,550 of Your Child’s Expenses Can Be Written Off!
It blew my mind when I first learned that we could hire our children. Now, I don’t have any children, but I was still pumped and couldn’t wait to share the news.
There is a whole lesson on how to go about doing this, and out of respect for Dr. Lynn Richardson, I’m not going to give away all her goodies. But the Small Business Administration (a government organization) did an article entitled, “Five Reasons to Hire Your Child.” I’m not going to review all five reasons in this article because I want to focus on one point. You can click the preceding link, though, to read the full article.
I want to talk to you about having up to $12,550 of your child’s expenses written off at tax time. For this to work you have to have a homebased business (yes there’s a class to help you with that, too). It’s simpler than you probably think, and you may already be running one and not even know. If you do hair, nails, taxes, babysit, cook, or tutor, that’s a homebased business. If you drive for Uber or Lyft, that’s a homebased business.
But, what about the children. The government allows you to pay your child as an employee of your business. They are due the same benefits of any other employee. Your child can do administrative tasks like filing, logging receipts, answering calls, modeling for your advertisements, etc. So, essentially, what you do is, you pay your child a salary comparable for the work performed. You can google how much is paid to do certain services. Then you may your child a percentage of that amount. You deposit money into an account in your child’s name,
like any other employer would. And then the money in that account can be used to buy all the stuff you would normally pay for anyway.
Scenario
Let’s say you do want to start an exercise channel for mommies and toddlers. Your child could do things like co-star with you in the video, be a model on advertisements; help set out exercise mats, help think of exercises, etc. You can be as creative as you want with deciding on these duties, but has it to be legitimate work for a legitimate wage. You would not pay your child $ 2000 a month to do that. Disclaimer, this is for illustration purposes only. Let’s say you paid her $200 a week to do it. You would deposit that $200 in her account and then use her debit card to buy the stuff you would have already had to buy for them anyway. Use that debit card to buy their food, clothes, entertainment, childcare, birthday gifts, etc. And at the end of the year, because it was less than $12,550 they don’t have to pay income taxes on it.
There are rules for how to do this- but it’s completely legitimate. Wealthy people do it all the time. Think about how many wealthy people have the whole family involved in the “family business.” Get your money back! It does not matter the age of your children, how many children you employ, or how many businesses for which you employ them. On the surface it looks like you’re losing money because you are paying them a salary; but you are only using the money on the stuff you would have had to buy anyway. Now, it becomes a business expense for you. Hey, and that’s only one of the five advantages.
The government supports small businesses by enacting laws like this. Learn the rules of the game by checking out Dr. Lynn Richardson’s, “Hire Your Kids and Get Your Money Back” and How to Start a Homebased Business. Save yourself up to $12,550 (2021). Start small and grow as you go.
