Smart Moves: How Hiring Family Can Boost Your Tax Savings

If you're a small business owner with kids in high school or college, or even a spouse or parent looking for a role, consider hiring your family. Beyond the obvious benefit of keeping money in the family, this strategy may unlock meaningful tax advantages.

For sole proprietors and certain LLCs, hiring your under-18 children means their wages are exempt from FICA and FUTA taxes. That’s right — no Social Security, Medicare, or federal unemployment tax obligations for their pay. Once they turn 18, FICA taxes kick in, and after 21, FUTA applies too.

But that’s just the start. You can also deduct their wages, which lowers your federal and potentially state income taxes. If their annual earnings stay below $15,000 (or higher based on filing status), they won’t owe federal income tax either.

Want to go a step further? Your child can contribute to a Roth IRA. Their wages count as earned income, meaning they can put away up to $7,000 a year in 2025 — setting them up for decades of tax-free growth.

Bottom line: With proper documentation, fair pay, and meaningful work assignments, hiring family isn’t just practical — it’s financially smart.

Ready to make the most of family and finances? Let Verity CPAs guide you through the process. 📧 info@verity.cpa | 📞 808.546.5026