Well, if you are like me, you are eventually going to come to the day that your child is old enough to work and if you are lucky is going to want to work. What most people do not know is that there is a great way for both you and your child to earn some money. Your child can earn some cash and you can earn some pretty good tax breaks!
It all basically starts with you, the parent, having a business. If you do not have one, then you are missing out on one of the greatest opportunities to change your financial future and that of your child. The simple fact of the matter is that even if your business makes no money the tax write off’s alone make the investment worth while. I could go on at great lengths on this but the fact is that this article is about how your child can make money and how you can profit from it as well.
So first things first, start a home based business.
It does not have to be anything complicated or complex. Start a car washing business where you go door to door and offer to wash cars. Guess who is going to be doing the washing (wink, wink). Or a yard cutting and cleaning business, or a garage cleaning business or even house cleaning. Ok, now that you have a home based business here is how your kids can earn money and you earn some benefits.
Currently, the Internal Revenue Service allows you to write off a portion of your utilities and mortgage/rent payments as a business expense providing that you meet certain requirements. Please check with your local area CPA. This immediately brings you some pretty serious tax breaks and could mean extra money in your pocket!
Next, the IRS laws allow you to hire your child! There are a couple of key facts and rules you must abide by. First, the work must be commensurate with their age. So, if you have a young child that knows the alphabet they can file paper work, stuff envelopes, and handle light clerical work. Older children can do physical labor, like washing those cars we talked about or cleaning those garages and houses. The key point here to remember is that it must be work that, if not performed by your child, you would have to pay someone else to do. Also, make sure you keep very accurate records and that your pay is reasonable for the work being done. Don’t think you can get away with paying your child $30 an hour to file paper work.
The benefits; TAX SAVINGS and an almost completely tax free paycheck for your child!
Here is an example of how this could work;
Lets say for example, that you started a car washing/detailing business. Your child does your marketing by going door to door selling his/her services. Neighbors are a lot more likely to let your kids have the work so it makes sense. You pay them hourly for the marketing. Next, they do the actual car washing and you manage the books and accounting. At the end of the summer/year you calculate that you paid your child $5,000. Since that $5,000 would normally be paid to you the business owner you would, on average, be taxed at about 35%. So by paying your child you reduce your taxable income and save about $1,750 and since your child has a standard allowable deduction of a little over $5,000 for the year their earnings are completely tax free! Beats working at the local fast food restaurant don’t it? Furthermore, you as the business owner can do this for each and every child in your household compounding your savings/earnings and this does not even take into account the tax write offs you are going to have at the end of the year for your business expenses! Oh yeah, and before we forget, your business just might actually turn a profit as well!
As you can see this is an outstanding way to get the whole family involved in making money! It also is a means and method of leaning the advantages of a home based business, how your child can earn money, and the benefits and fun of owning a home based business. Let me tell you, I can not even begin to count the number of successful business owners of business I have consulted for that started out this way. As a matter of fact, one of my clients turned a simple lawn mower and rake into one of the largest landscaping businesses in our area.
So what are you waiting for?