Mark Kohler explains why paying your kids for real work in your business is legal and smart. Kids in the 0-10% tax bracket earn income you'd otherwise pay at 30%, and they can put $15,000 into a Roth IRA tax-free. You get a business deduction, they learn about taxes and responsibility.
Okay, I want to respond to the first comment that I'm as a business owner, making my kids pay taxes to pack my pocket. Really? Let's go through this. Number one, this is not you just trying to get a write off. This is because you're already supporting your kids, whether they're under age 18 or 18 and older, going to college, and you're giving them money. Take a tax write off for the money you're giving them already because you're helping them in some form of fashion. Which brings me to number two. Make your kids pay taxes. Yes. Teach them responsibility. Teach them what taxes are about. If you're giving them money, they should damn well be paying taxes on it. You kidding me? Let's helicopter more. Number three, if you really want to help them pay their taxes, pay them for legitimate work in your business. Take a write off and if they owe taxes, gift them money to pay their taxes. Get it? They're probably in a 0 to 10% bracket. You're in a 30% bracket. Why pay taxes at 30%, then pay them and not take a write off for work they legitimately did? And apparently you don't want them to pay taxes and learn that concept so you can gift them the money at 10%. Now you save 20%. So you're planning taxes as a family paying taxes in the lowest bracket because your kids are actually helping in the business. And another point is, don't we want our kids to start learning how to save, building a retirement account? They can't have a Roth IRA unless they have earned income. So let's pay them legitimately for helping in the business so they can pay tax, which they really don't, on the first $15,000 of earned income on their federal return. And then you take a tax write off and they can open a Roth ira. Am I missing something? Which brings me to my final point. This whole strategy is legit. It's honest, it's, it's legal and makes sense because we as business owners need to be teaching our kids entrepreneurship and taking a tax write off for paying them, helping in the business. And damn it, I want them paying taxes so they can start to contribute to society.
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