I met with one of my higher income clients this morning to discuss tax saving ideas. She operates a business out of her home to keep the overhead low. This year her income has increased about 20 percent and it looks like the growth will continue for the foreseeable future. We discussed a number of tax saving moves, from incorporating her business to setting up a pension plan, and a host of other ideas. It was my idea to employ her fourteen year old daughter in the business that interested her the most.
My client had been concerned about how she was going to pay for her daughter’s college education. Employing her teen in the business would allow her to shift income from her twenty eight percent tax bracket to her daughter, who is in a zero tax bracket. In four years when the daughter graduates from high school, assuming she saves the majority of the money, she will have the first couple of years of college expenses in the bank, and her mother will have written off the cost through her business! A win, win outcome!
Spending more time with her daughter at this stage of her adolescence was also a priority. Employing her would lead to them working together on projects and sharing ideas and experiences. She could also teach her valuable job skills she may otherwise not learn if she worked at many of the jobs that are typically held by teenagers.
Employing your child is not for every situation. In the case of this client, it is a valuable strategy that may provide benefits for many years to come.
Are you looking for a smart strategy for your business, nonprofit, or family finances? Give my office a call today!
