When you’re self-employed, you’ve got a lot of responsibilities to juggle. It’s not unusual to ask for help from family members — and that might even include your kids. But have you ever considered paying them for the work they do? Not only is it possible, but it could have tax benefits for you as a self-employed taxpayer.
If you do decide to put your child(ren) on payroll, it will impact your tax situation and theirs. Here’s what you need to know.
At what age can I put my child on payroll?
There is no minimum age someone must be before earning a salary. But double-check your state’s child labor laws and ensure your child meets the age requirements to work and they can complete their job within your state’s regulated working hours. The federal child labor law requirement generally sets 14 as the minimum age for most jobs, including parents hiring their children to work for them.
For example, Georgia’s child labor laws allow 14 and 15-year-olds to work 3 hours on a school day and 8 hours on non-school days. Following these guidelines, teens can work a maximum of 18 hours per week during the school year, or 40 hours per week during summer break. Additionally, minors in GA are prohibited from working before 7 a.m., after 7 p.m. (extended to 9 p.m. June 1st – Labor Day), or during normal school hours.
Can I pay my child a salary without getting in trouble with the IRS?
Yes, you can legally hire and pay your child to work for you. There is no minimum age someone must be before they can earn a salary. To make sure you are compliant with the IRS:
- Choose a job that is appropriate for their age. Don’t hire your toddler to do your accounting.
- Pay them fairly. How much would you offer anyone else to do the same job? That’s what you should pay your child.
- Keep track of the hours they work and the type of job they do for your tax records.
- Write out a contract outlining their responsibilities. The duties you give your child should only be related to your business–not personal services, like housework or mowing the lawn at home.
- Fill out IRS Form W-4 and complete U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification.
How much can I pay my child tax-free?
Your child can earn up to the standard deduction amount, $15,750 for single filers on 2025 tax returns, without owing income tax. You are still expected to withhold income tax from your child’s wages during the year, but they can file a return and claim a refund for taxes paid.
If you are a sole proprietor or have a partnership with your spouse and your child is age 17 or younger, the IRS says you don’t need to pay payroll taxes – including Social Security, Medicare, or FUTA (unemployment) tax – on their wages. However, you do need to withhold income tax no matter how old your child is.
Note: Your child’s wages are subject to Social Security, Medicare, and FUTA tax if:
- You are in a partnership with someone other than your spouse
- Your business is a corporation
- They work for an estate (even if the estate belongs to a deceased parent)
What are the tax benefits of hiring my kids?
Hiring your child to work for you can provide several benefits during tax time. For instance, you can deduct the wages you pay your children as a business expense. This deduction can lower your taxable income and reduce your overall tax liability. Your child may even be able to take advantage of educational credits, like the American Opportunity Tax Credit (AOTC), if your own income is too high.
Additionally, if your child has earned income, the IRS permits you to open an individual retirement account (IRA) for them, allowing them to start growing their retirement savings early.
Payroll tax exemptions
If your business is a single-member LLC taxed as a sole proprietorship or an LLC taxed as a married couple, you may not be required to withhold or pay FICA (Federal Insurance Contributions Act) or FUTA (Federal Unemployment Tax Act) tax on your child’s wages.
The type of business and age of your child determine withholding requirements. If your child is under 18, and your business is a sole proprietorship or a partnership, then your child’s wages are not subject to FICA or FUTA taxes.
Once they turn 18, they will be required to pay FICA taxes for Social Security and Medicare. However, their income will be exempt from FUTA taxes until they turn 21.
If the business is a corporation, an estate, or a partnership (unless each partner is a parent of the child), you must withhold Social Security, Medicare, and FUTA taxes regardless of age.
Should I give my child a 1099 or a W-2 tax form?
As a rule of thumb, you should issue a W-2 to anyone who works for your business and is classified as an employee. This includes your child. To determine whether your child is an employee or a contractor, look at how much control you have over their work. If you set their hours, provide the tools, and direct how the work should be completed, the IRS will generally consider them an employee.
If you’ve decided to treat your child like an independent contractor for tax purposes, you’ll need to give them a 1099-NEC (if you’ve paid them $600 or more). Treating your child like an independent contractor means you are not withholding income tax from their paycheck, and you are not paying the employer’s share of Social Security and Medicare. Instead, they would be responsible for self-employment tax. Contractor status typically applies only when they control how the work is done and use their own methods or tools.
It also means that you do not manage them or their work directly. Misclassifying an employee as an independent contractor could have consequences for you as a business owner.
Does my child need to file their own tax return if they work for me?
It depends on how much income they earn. If your dependent earned more than the standard deduction amount for that tax year, they will need to file a personal income tax return.
If your child earned less than the standard deduction amount, they may still want to file anyway, because they could be owed a tax refund.
Can I still claim my child as a dependent on my tax return if I hire them?
Yes! If your child still relies on you for financial support and meets the typical dependent requirements, you can claim them on your return. Even if your child files their own return, you can still claim them as a dependent.
