Running a business isn’t easy. Between managing expenses, employees, and taxes, you’re constantly looking for ways to stretch your dollars. But here’s something most business owners overlook: hiring kids to work in your business.
It’s not only legal—it’s smart. Thanks to the One Big Beautiful Bill Act (OBBBA), the tax benefits of hiring kids in 2025 are stronger than ever. Done right, this move can save you thousands while teaching your children real-world responsibility.
Here are the biggest reasons why every parent-business owner should take a serious look at this strategy.
The Standard Deduction Advantage
The IRS allows single filers in 2025 to earn up to $15,750 without paying federal income tax. That means if your child works in your business and you pay them fairly, they can pocket that entire paycheck tax-free.
Imagine hiring your 15-year-old for $10,000 worth of work—helping with bookkeeping, filing, social media posts, or customer support. They keep all their earnings, and you deduct the $10,000 as a business expense.
See the official IRS announcement on 2025 inflation adjustments for more details.
Payroll Tax Perks for Parents
If you’re self-employed or you and your spouse run a partnership, you’re in the sweet spot. According to IRS rules on family employment:
Wages paid to kids under 18 are exempt from Social Security and Medicare (FICA).
Wages paid to kids under 21 are exempt from federal unemployment tax (FUTA).
Example at a 9.87% Rate
Let’s say you pay your child $15,750. At a 9.87% tax rate, that’s about $1,555 in tax savings. Multiply that by three kids, and you’re looking at $4,665 saved per year—and your children owe no federal income tax.
Shifting Income the Smart Way
Parents are usually taxed at higher rates than their children. By hiring kids, you’re shifting income into their zero-tax bracket.
Instead of you paying 10–12% (or more) on that income, your child pays nothing. This income-shifting strategy lowers your household’s overall tax bill while keeping money in the family.
Learn more in IRS Topic 553: Dependents’ Earned Income.
Still Plenty of Savings
S and C corporations don’t get the FICA exemption that sole proprietors enjoy. That means you’ll still need to pay payroll taxes on your child’s wages.
But don’t dismiss the strategy. You still deduct:
The wages paid
The payroll taxes themselves
That’s two layers of tax reduction. Many families in corporate setups still save several thousand dollars per year.
Beyond the Numbers
The financial benefits are clear—but the long-term skills your child develops are priceless. By hiring kids, you’re teaching them:
The value of showing up for work
How to manage a paycheck responsibly
Budgeting and saving skills most adults lack
Many parents also help their kids open a Roth IRA. Contributing even $1,000–$2,000 per year into a Roth IRA starting at age 14 could turn into hundreds of thousands by retirement.
See Forbes’ Roth IRA for Kids Guide for more on this powerful move.
Why This Strategy Works
This isn’t a tax loophole—it’s simply smart planning. Instead of paying more to the IRS, you’re paying your child for legitimate work:
Your business lowers taxable income.
Your child earns money without federal income tax.
Your household keeps more overall.
Check out our post on family tax planning for small business owners for other ways to stack savings.
Hiring kids isn’t just about this year’s tax return—it’s about setting your children up for future success. The earnings they keep can be used for:
Education expenses
Saving for their first car
Funding a Roth IRA for early retirement growth
And most importantly—they learn independence. By starting early, kids develop confidence and financial discipline that will serve them long into adulthood.
Final Takeaways
The tax benefits of hiring kids in 2025 are too good to ignore:
Children can earn up to $15,750 tax-free.
Parents in a ~9.87% bracket save about $1,500 per child.
Sole proprietors and partnerships enjoy payroll tax breaks.
Corporations still benefit through wage and payroll tax deductions.
Kids gain valuable money and life skills.
If you’re a parent and business owner, this is one of the simplest strategies to cut taxes while investing in your family’s future. Done right, it keeps more money where it belongs—with you and your kids, not the IRS.
