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Split income with the kids

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in Small Business Tax,Small Business Tax Deduction Strategies

Do your children help out at the office while they’re off from school? You can reward them at the same time you save tax overall.

Strategy: Pay your kids for the work. The income is taxed at their low tax rate and is deductible by the company.

In fact, even if you take less salary yourself as a result, the family comes out ahead.

Say that your child in college is home for a few weeks in December. The child is in the 10% bracket and you’re in the 35% bracket.

If you pay your child $5,000 in wages, the child’s tax is $500 at most (less if part or all of the income can be sheltered by his or her standard deduction. Compare that to the $1,750 in tax you’d pay on the same amount.

Tip: Your child’s salary must be reasonable for the work performed.

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