Did you know that you can actually save on taxes by hiring your kids in your Dental practice?

It’s true! Let us explain how it works.

When your children work for you, you can move some of your income from your higher tax bracket to their lower one. It means the money you pay them as wages becomes a tax-deductible expense for your business, which leads to tax savings. And here’s the exciting part: the first $13,850 they earn is tax-free! Thanks to the standard deduction, your kids won’t have to worry about paying taxes on that amount.

But wait, there’s more!

By employing your children, you can also help them save for retirement. They can contribute up to $6,500 per year to a retirement account. If they choose a Traditional IRA, the first $18,850 they earn from your business as wages won’t be taxed since it’s considered a pretax contribution. Imagine this: let’s say you contribute $6,500 per year for three years to a Roth IRA for your 8-year-old child. Assuming a 6% average annual return, they could have around $1,073,293 of tax-free money by retirement age!

Oh, and here’s a bonus: if your business is structured as an LLC or Partnership, the wages you pay your kids won’t be subject to any payroll taxes. That means even more tax savings for you!

Just make sure that your kids are genuinely doing real work for your business and pay them a fair amount. Keeping good records, like timesheets and job descriptions, it is important to stay on the right side of the tax rules.

So, by hiring your children in your Dental Practice, you can save on taxes and help secure their future financially. It’s definitely something worth considering!

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Custom Accounting CPA

Author

  • President and Founder of Custom Accounting Inc. is a CPA licensed in New York and New Jersey, with an "Elite and Unique" Certified Tax Coach designation, held by fewer than 1000 tax professionals in the USA.

    With a BS and MBA in Accounting/Finance/Business Management and 15 years of industry experience, including 4 years as a Senior Auditor at Deloitte & Touche, Natalya specializes in tax planning for business owners and entrepreneurs.

    She offers IRS-approved Proactive and Forward-Thinking Tax Reduction strategies saving tens of thousands of dollars, from income shifting to QuickBooks Online management. Phone: +1 646 661 2010

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