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> recommended employing your children starting from the age they are able to do household chores, which offers a double benefit of reducing a parent’s taxable i
by gnicholas 2y ago
> recommended employing your children starting from the age they are able to do household chores, which offers a double benefit of reducing a parent’s taxable income while building an investment-accruing tax shelter for the 7-year-old
In case anyone was wondering, you cannot reduce your taxable income by paying your child to clean your house (I am a former tax lawyer). Could you pay your teenager to work for your company, and reduce the corporate income? Yes, subject to child labor laws — and you still have to pay payroll and income taxes.
Alternatively, you and your spouse can just straight up give your kid $36,000 per year as a gift (with no deduction, but also no income/payroll tax burden).
Having a 7-year-old on the payroll seems like a great way to get audited.
- bombcar 2y agoThe main goal with the “hire children” discussions I’ve seen is to lodge taxable income to the child so you can start investment/retirement accounts. But there are other ways to do the same thing.
- meowfly 2y agoYeah. I've always heard this as: make your child a board member and then have them put their money in a Roth. No idea if that's an easy path to an audit
- gnicholas 2y agoOne problem with this is that we have no idea what the tax code will look like in 50+ years, when the kid is pulling money out. It’s quite possible that Roth accounts (which are funded with post tax contributions) will no longer be tax free for withdrawals, for example. I could easily see this being walked back for high-income folks, as a way to pay off the enormous debt we are currently incurring.
- bombcar 2y agoThat's one of the things that people do plan for - by not allocating all resources to a Roth, for example. You can never predict all future tax changes, but you can be more flexible by having multiple different "stacks" that you can utilize when you want.