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Thursday, October 23, 2025

You could score a tax break for hiring your own kids this summer — if you follow the rules

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“But when you have a 60-second video, you aren’t trying to convey that nuance,” Metras said.

If you’re planning to hire your children this summer, here are some key things to know, according to financial experts.

Employing your kids can be ‘tax-savvy’

“Hiring your child can be a tax-savvy move,” said certified financial planner Sean Lovison, founder of Philadelphia-area Purpose Built Financial Services. “Their wages can be deducted as a business expense, which can lead to significant savings for your small business.”

For 2024, the federal standard deduction for single filers is $14,600.

“If your child’s income falls within the limits, they may not owe any income tax, which can be a win-win,” said Lovison, who is also a certified public accountant.

Plus, payments to children may avoid Medicare and Social Security taxes, depending on the child’s age and your legal business structure, according to the IRS. 

If your child’s income falls within the limits, they may not owe any income tax, which can be a win-win.
Sean Lovison
Founder of Purpose Built Financial Services

Once your child has “earned income,” or wages from employment, they can make Roth individual retirement account contributions, which can be powerful for younger savers, experts say.

There’s a triple-tax benefit for kids: They typically pay little to no taxes on contributions, plus growth is levy-free and withdrawals are generally tax-free in retirement, according to CFP Carol Fabbri, managing partner of Fair Advisors in Conifer, Colorado.

“It is never too early to get in the habit of saving,” she added.

However, you need to watch the contribution limit for 2024, which is your child’s total earnings or $7,000, whichever is smaller.

What to know before hiring your kids

Before hiring your children, it’s important to know state and federal labor laws, along with tax rules, experts say.

“Some states pretty much ban you from hiring children under the age of 14 under any scenario,” Lovison said.

If hired, your children must do real work for the business, and their compensation should be reasonable to match their tasks.

“Record-keeping is non-negotiable,” Lovison said. “It not only helps you navigate the tax landscape but also serves as a valuable resource if any questions arise about your child’s employment.”

Payments to children are subject to income tax withholding regardless of the child’s age, according to the IRS. Hiring kids as W-2 employees and withholding taxes “covers your bases,” but they’ll get a full refund of taxes paid if they’re under the standard deduction, Lovison said.   

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Chris Washington
Chris Washingtonhttps://whnynews.com
Chris Washington brings over 25 years of experience in financial journalism to WHNY News. A Schenectady native, Chris has a keen eye for business trends impacting upstate New York. His insightful reporting has earned him numerous accolades. Chris holds a degree in Economics from Syracuse University.
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