Put Your Kids to Work!

Summer is flying by fast and hopefully your kids have found productive ways to spend their summer break.  But if they are still looking for activities for the last month, have you considered hiring them?  If you own a company that is a sole proprietorship or you and your spouse are the sole partners in a partnership, then you can employ your child under 18 years of age without paying social security or Medicare taxes.  They are also not subject to FUTA tax.  This will put a little extra spending money in their pocket and will allow you a business deduction for labor at the same time.

Keep in mind, though, your child will still be subject to income tax.  The child can still take a standard deduction which allows the first $6,100 of earned income to be tax free.  In the case of Michigan, an individual claimed as a dependent is still eligible for a $1,500 exemption for the state return.  Depending on how much they will be making, they may have a small amount of income tax due but not having to pay social security or Medicare taxes will be a big save for both you and the child!