31 May Here’s How to Save Significant Taxes and Build A Huge Nest Egg for Your Children
Let’s face it, children are expensive! Smart tax professionals know this, and have tax-wise solutions .
Put your children to work in your business and make them earn their own money. This expense provides you with a payroll tax deduction, making this an extremely attractive government subsidy!
If you operate a qualifying LLC or a sole proprietorship (if you do not have one of these structures I advise my clients on how to create one), the payment for hiring your child under 18 years old is not subject to payroll taxes. You get a tax deduction of say $16,000 ($8,000 to each child), and save approximated $6,400, if you’re in the 25% tax bracket–from income taxes and self employment taxes! You can then have your children contribute that amount to their respective Roth IRA’s. Your children each pay approximately $170 in total taxes on their $8,000 earnings.
In addition, your children can develop good work habits, teach them of the value of money, and best of all you get to see them during your workday.
Its a win-win tax strategy.
However, as is the case with any and all tax reduction strategies, proper documentation is a must throughout this entire process. I educate my clients on the the necessary documents to make this lucrative tax savings strategy audit proof.