Tax Smart Real Estate Investors Podcast
284. The Triple Tax Benefits of Paying Your Children
Jul 30, 2024
Discover the surprising triple tax benefits of employing your children in the family business. Learn how this strategy not only offers financial perks but also instills a strong work ethic and valuable life skills in kids. Dive into the legal guidelines and income limits for hiring young workers, plus the advantages of funneling their earnings into a Roth IRA for tax-free growth. This insightful discussion reveals how to maximize tax efficiency while preparing the next generation for financial success.
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Quick takeaways
- Paying children to work in a family business provides significant tax benefits while teaching them essential skills and work ethics.
- This strategy allows parents to lower their taxable income and enables children to invest their earnings in a Roth IRA for future growth.
Deep dives
Benefits of Paying Children in Business
Paying children to work in a family business can yield significant tax benefits while simultaneously teaching them the value of hard work. According to the Fair Labor Standards Act (FLSA), parents can employ their children under the age of 18 without strict hour limits and compensate them up to the standard deduction amount, such as $14,600 for 2024, tax-free. This strategy not only reduces the taxable income of the parent but also helps children build skills, a work ethic, and understanding of financial concepts from a young age. Establishing early work experience can prevent children from becoming overly reliant on family wealth, allowing them to grasp the value of money and its management.
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