Nick PerryFounder and CEO of 7 Figure Cartel

Pay Your Kids Tax-Free? (Legal Wealth Strategy Explained)

20 Mar 2026 · 1 min

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In this concise explainer, Nick Perry outlines a legal tax‑saving and wealth‑building strategy for parents who own a business. He advises hiring one’s children as employees and paying them up to $14,000 per year, which is tax‑free for the child and provides a $14,000 business expense deduction. Because the child receives a W‑2, they become eligible to contribute to a Roth IRA. Perry recommends directing $6,000 of the child’s salary into a Roth IRA, noting that, with compound growth over 5‑10 years, the account could exceed $2 million. He frames the approach as the difference between merely giving children money versus creating lasting wealth.

Chapters

If you have kids in a business and you're not doing this, you are literally leaving free money on the table. The IRS doesn't want you to know this, but you can pay your kids up to $14,000 a year as employees in your business, tax-free to them and tax-exempt to your business, which means your business gets a $14,000 deduction and your kid gets $14,000 tax-free. Now here's where it gets crazy. Because they now have a W-2 income, they qualify for a Roth IRA. So take $6,000 of that salary, put it into a Roth IRA for them, and in 5 to 10 years' time, they'd have over $2 million. And that's the difference between leaving them money and leaving them wealth.