Daniel HonanFounder, Profitable Painter CPA PLLC · I help painting contractors increase profits & cash flow while reducing taxes♦ Bookkeeping ♦ Tax

Painting Biz Owners: Transform Your Tax Strategy by Hiring Your Kids! #YearEndTaxTips

Name: Painting Biz Owners: Transform Your Tax Strategy by Hiring Your Kids! #YearEndTaxTips
Uploaded: 2024-12-12T14:15:02+00:00
Duration: 43 s
Channel: Daniel Honan
Description: In this brief advisory segment, the presenter recommends that owners of painting businesses (and similar small enterprises) employ their children under…

12 Dec 2024 · 1 min

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In this brief advisory segment, the presenter recommends that owners of painting businesses (and similar small enterprises) employ their children under age 18 and pay them wages for legitimate work performed. By doing so, the business can take advantage of the 2024 federal standard deduction of $14,600, allowing the child to earn that amount tax‑free at the federal level. Because the child is typically in a 0% tax bracket, income shifted from the parent’s 22‑32% bracket to the child results in significant tax savings. The speaker also notes that state income‑tax deductions may differ from the federal amount, so owners should verify their state rules. The crucial condition is that the compensation must be reasonable and correspond to actual work performed by the child.

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pay your kids who are under age 18 from your business if they've been performing work in the business. So paying your kids is a great tax strategy. The federal standard deduction is $14,600 this year. That means they can earn that much from your business without paying any taxes on the federal level. If you live in a state with an income tax, your state standard deduction may be different. Not every state follows the Fed. So just kind of be aware of that, but pay your kids. They are in a 0% tax bracket. You're in a 22 to 32% tax bracket. It makes sense to transfer money to them and pay no tax. The key being you're paying them for work that they have performed that is reasonable for them in the business.