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    Hiring your own kids can provide tax breaks for business owners


    Mixetto | E+ | Getty Images

    If you’re self-employed, hiring your kids could provide tax benefits — provided you follow labor laws and IRS rules, experts say.  

    Small businesses hiring their own children is a popular topic among social media influencers on platforms such as TikTok, Instagram and YouTube. But tax professionals say they are often battling misinformation from such posts.

    “Most of the videos on TikTok have a kernel of truth to them, but they’re embellished or it only makes sense in very specific situations,” Matt Metras, a Rochester, New York-based enrolled agent and owner of MDM Financial Services, previously told CNBC.

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    “But when you have a 60-second video, you aren’t trying to convey that nuance,” Metras said.

    If you’re planning to hire your children this summer, here are some key things to know, according to financial experts.

    Employing your kids can be ‘tax-savvy’

    If your child’s income falls within the limits, they may not owe any income tax, which can be a win-win.

    Sean Lovison

    Founder of Purpose Built Financial Services

    Once your child has “earned income,” or wages from employment, they can make Roth individual retirement account contributions, which can be powerful for younger savers, experts say.

    There’s a triple-tax benefit for kids: They typically pay little to no taxes on contributions, plus growth is levy-free and withdrawals are generally tax-free in retirement, according to CFP Carol Fabbri, managing partner of Fair Advisors in Conifer, Colorado.

    “It is never too early to get in the habit of saving,” she added.

    However, you need to watch the contribution limit for 2024, which is your child’s total earnings or $7,000, whichever is smaller.

    What to know before hiring your kids

    Personal Finance Tips 2024: Roth IRAs

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