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If you don’t want your teenaged child lounging around all summer while school is out, there may be a tax-smart solution.

Put your child to work in your business by making your offspring an official employee and paying him or her a “fair wage” for services performed.  As an employee, your child is entitled to the same benefits as other employees, like health insurance and retirement plan contributions.  Because your child will likely earn less than the standard deduction amount, the federal income tax consequences will be minor or nonexistent.  Another advantage is that the wages are “earned income,” which is exempt from the “kiddie tax” calculation. In contrast, unearned income above $2,300 received in 2022 by a dependent child under age 24 can be taxed at the parents’ top rate.  Your child doesn’t even have to wait until tax return time to recoup tax withholding.  When he or she fills out the W-4, have your child claim the exemption.  This tax break is only available to a dependent child if he or she had no tax liability for 2021 and will earn no more than $13,300 in 2022.  The withholding exemption is only good for this year. If your child claimed the exemption last year, a new W-4 should be filed.[/vc_column_text][us_image image=”3562″][/vc_column][/vc_row]