Writing off your child’s college education expenses

If you frown at the high cost of a college education, this tax strategy is for you. You can put your child on the payroll of your practice for performing office chores and other business-related tasks. The most common way to utilize young children in your small business is for them to provide cleaning services, or routine copying, filing, and typing.

In 2018, a child can earn up to $12,000 and pay no federal income taxes on the earnings because of the standard deduction. Your business can deduct wages paid to your child provided the amount is reasonable and for bona fide work. Bottom line: You’ll escape federal income taxes of up to $12,000 of your business income, and if you are a sole proprietorship, you will eliminate self-employment tax on the income as well.

Any income your child earns over and above the $12,000 standard deduction is taxable at your child’s rate. Since the 10% tax bracket extends to $9,525 for a single filer, your child could earn an additional $9,525 and owe just $952.50 of federal income tax on the money. Because your marginal tax rate is likely much higher, the extra money your child earns may result in family tax savings.


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