Parents can hire their kids for legitimate business work like document shredding or office cleaning and deduct their wages as a business expense. The child pays little or no tax on earnings up to the standard deduction, while the parent saves taxes at their higher bracket, shifting income from 20-30% tax rates down to zero.
Chapters
Why are you paying taxes at your bracket and just giving your kids money? Let's put them on the payroll or pay them in the right structure and take a tax write-off. Let them pay for their own things. This is one of the number one reasons why we want to implement this strategy. So if I'm at a 20%, 30% combined federal and state rate, I can pay my kids under age 18 or 18 and older, and they may be in a zero bracket, for crying out loud. They might be able to use their standard deduction this year. The beauty is you're shifting income from your bracket to theirs, and that's critical. Now, Now, it's got to be legit. We're not paying them to do the dishes in the kitchen or take out the garbage or chores. You need a small business obviously. So, you're going to make sure this is implemented with your clients that have small businesses, even rental properties. And we're going to think of jobs that the kids can do that would be helpful. Shredding paper, cleaning the office, janitorial, stuffing envelopes, marketing. So, let's think outside of the box and think legitimately of what these kids can be doing in the business. And then we want to be able to shift that income from our tax bracket to their tax bracket.
