Do you have kids? Do you want to pay less in taxes every year? If you answered yes to both questions, here's an easy solution: start paying your kids.
There are some important things to note though. You have to pay your kids for actual work done, document the work, and make sure that you give them the money.
If you are a sole proprietor or a single member LLC, you may be able to deduct the amount you pay them from your income. This is a huge savings because if they are under the age 18, they are not subject to Social Security and Medicare taxes, which would save you 15%. Your child will also receive a standard deduction on their income tax return, which means that they do not pay any taxes on their first $14,600 of income for 2024.
Now, think about this for a minute. If you are in the 22% bracket and you pay your child $10,000, you save almost $3,700.
Speak to your tax professional before implementing this to confirm that it makes sense for you. If you need a recommendation to an accounting firm we trust, please send us a message!
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