The OBBBA Increases the Tax Benefits of Employing Your Child
If you own a business and have children, the One Big Beautiful Bill Act (OBBBA) just made the popular “hire your child” tax strategy even more attractive starting in 2025.
Thanks to the OBBBA, the standard deduction for a single taxpayer increases to $15,750 in 2025 (with annual inflation adjustments going forward). This means your child can earn up to $15,750 in wages from your business and pay zero federal income tax—regardless of whether you itemize or take the standard deduction.
If you’re a sole proprietor or operate a spouse-only partnership, the benefits are even better. Wages paid to your children under age 18 are exempt from Social Security and Medicare (FICA) taxes, and those under age 21 are exempt from federal unemployment tax (FUTA). This allows you to deduct their wages while avoiding employment tax costs entirely.
For example, if you hire three of your children and pay each $15,750 for legitimate work, they owe no federal tax—and you could save thousands by deducting those wages on your Schedule C, lowering both your income and self-employment taxes.
Even if you operate as an S or C corporation (where payroll taxes apply), the strategy still works. While FICA and FUTA taxes are owed, you receive a deduction for those taxes, and your children still owe no income tax on their wages. In one example, a family netted $9,663 in government-paid tax savings after accounting for taxes paid and deductions received.
In short, hiring your child can create a win-win: they earn tax-free income, and you reduce your tax bill.
Thanks to the OBBBA, the standard deduction for a single taxpayer increases to $15,750 in 2025 (with annual inflation adjustments going forward). This means your child can earn up to $15,750 in wages from your business and pay zero federal income tax—regardless of whether you itemize or take the standard deduction.
If you’re a sole proprietor or operate a spouse-only partnership, the benefits are even better. Wages paid to your children under age 18 are exempt from Social Security and Medicare (FICA) taxes, and those under age 21 are exempt from federal unemployment tax (FUTA). This allows you to deduct their wages while avoiding employment tax costs entirely.
For example, if you hire three of your children and pay each $15,750 for legitimate work, they owe no federal tax—and you could save thousands by deducting those wages on your Schedule C, lowering both your income and self-employment taxes.
Even if you operate as an S or C corporation (where payroll taxes apply), the strategy still works. While FICA and FUTA taxes are owed, you receive a deduction for those taxes, and your children still owe no income tax on their wages. In one example, a family netted $9,663 in government-paid tax savings after accounting for taxes paid and deductions received.
In short, hiring your child can create a win-win: they earn tax-free income, and you reduce your tax bill.