Lesson · Facts First
Hiring Your Kids
Your child does real work for the family business - the wages are deductible to the business and tax-free to the kid up to the standard deduction.
The facts
- 01Wages paid to your under-18 child by your sole proprietorship (or parent-owned partnership) are exempt from FICA and federal unemployment tax - IRC 3121(b)(3)(A).
- 02For 2026 the standard deduction is $16,100 for a single filer - a child earning up to that amount in wages owes no federal income tax on it, while the business deducts the wages as an expense.
- 03The work must be real and the pay reasonable for it - journal the tasks (filming, packing, social media, office work) like any other employee.
- 04Pay them into a Roth IRA: the child has earned income, so up to $7,500 (2026) can grow tax-free for the next half-century.
Sources
- IRC Section 3121(b)(3)(A)
- IRS 2026 inflation adjustments (standard deduction $16,100 single)
- IRS Notice 2025-67 (IRA limit)
Educational content only — not tax, legal, investment, or VA-benefits advice. Figures verified against the cited sources for 2026; confirm your own situation with a qualified professional before acting.
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