In this video Mark Kohler explains a tax‑saving strategy for small‑business owners who have adult children (18+). He advises paying those children through payroll or, more simply, issuing a 1099 for services they provide to the business. By shifting income to the kids’ lower tax brackets, the business owner can claim a deductible expense while the child benefits from the standard deduction (about $12,200 in 2019) and potentially pays little or no tax. Kohler outlines how to structure the business into operational and holding entities (LLC, S‑Corporation) and suggests practical roles for kids—property manager, marketing, bookkeeping, janitorial, construction cleanup, etc.—that can justify the payments. He also recommends creating a family “board of advisors” to formalize the kids’ involvement. Throughout, he stresses consulting an accountant, notes that the strategy works for modest‑income families, and ends with calls to subscribe to his newsletter and YouTube channel for more tax‑legal guidance.
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If you own a small business and you have kids 18 or over, you might be still helping them with life expenses. Or they may be helping you directly in your business every day. Whatever the case may be, there's a great tax strategy of getting those older kids on the payroll. Okay, easy tax credits. Quit paying taxes and giving your kids money. Put them on the payroll or 1099 and save taxes. Let them pay their own taxes in a lower tax bracket. That's the concept. It's that easy. Now I'm going to hit the highlights. I've got more videos on my website, the tax and legal library books all sorts of articles on this. So you want to educate yourself on this if your accountant isn't telling you about this strategy. Now here's the basics. If you've watched my videos before, we're going to have your link life into two sides, operations and holdings or assets. So you might have an LLC with some rental property. You might have an operational entity, sole proprietorship or llc. And typically you're going to have an S corporation. That's where my clients live and reside and save a ton in taxes topics for another day. But for those kids 18 and over, we're going to want to give them a 1099. That is our easiest and best strategy. You might give them a 1099 from your operational entity, Sole Proprietor LLC or S Corp, where you want to be nine times out of 10 or directly out of an LLC that holds rental properties. Maybe one of your kids is acting as the property manager on one of your rentals where they live. So your kids could be at college living in one of your rental properties, managing the rental property and getting paid at 1099 to manage it. So therefore you're getting a tax deduction. One quick example here too. When my older kids call me up and go, hey dad, I need help with tuition or my car broke down, I don't give them money. My company pays them for their services and I get a tax write off. Then they go use the money for tuition or to fix their car. So you just change the way you're doing this. You don't have to be rich to do this. Just change the method. Now you may say, well my kids don't help in the business. Oh they better. Because I want a board of directors, a board of advisors, whatever you want to call it. I call it generally a board of advisors. And when we set up an LLC for a client, we create that board. When we set up a corporation, we create that board. And this is a board where you're going to meet quarterly or annually having a family board meeting, talking about the business. You can even have this in an LLC board of advisors to help manage your ongoing real rental property investment. So it's very, very simple. Now kids may still be involved in your marketing, in your bookkeeping, on your social media. My kids have helped in my business in all sorts of ways. They may even be a janitor in your for your building or do construction cleanup on your rehabs or whatever. Think of ways that your kids can be involved in your business. Now at Christmas you give them a gift. They're going to love a 1099 under the Christmas tree. Oh, it's special. Put it in their stockings, they're going to love it. But anyway, take a tax write off and then help your kids pay their taxes in a different bracket. So they're going to file a 1040, maybe even a schedule C because they're going to have a little small business helping support you. So there's again lots of details here. It's a concept you need to talk about with your accountant. My accountants and my accounting firm help all of our clients in this situation maximize this write off. Again, the kids, they don't even pay income tax on the first $12,200. $12,200 in 2019. The standard deduction has been blown up. Is bigger. Use it. Take advantage of it. This is going to help you better live your American dream and teach entrepreneurship to your kids.
Thanks so much for watching that video and I want to be your source for tax and legal strategies. It's hard enough to live the American dream without being out on the web on Google trying to find answers to complex questions and just climb get a mouse. Hoping you got it right. My team and I want to be a huge resource to you, the law firm, accounting firm, my education resources on my site. Please continue to follow these strategies. I know they'll save you thousands now click here if you want to be a part of my newsletter. It's awesome. Weekly updates and deadlines and strategies and tips. Also subscribe to my YouTube channel. You'll love it. And make sure to click the bell icon so you get a little ping
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