The “Hire Your Kid” Rule: Pay Your Child $15,000 From the Family Business and Neither of You Owes the IRS a Dime Quick Read – Pay your child up to $16,100 from your sole proprietorship in 2026, and neither of you owes federal income tax or payroll tax on those wages. – S-corp…
d C-corp owners lose the FICA exemption entirely, owing the full 15.3% payroll tax, while only sole props and parent-only partnerships qualify for it. – Those earned wages unlock Roth IRA eligibility for your child, letting them start decades of tax-free compounding growth from an early age. – Are you ahead, or behind on retirement? SmartAsset’s free tool can match you with a financial advisor in minutes to help you answer that today
Each advisor has been carefully vetted, and must act in your best interests. Don’t waste another minute; learn more here. If you run a family business as a sole proprietorship or a spouse-only partnership, the tax code lets you move up to $16,100 onto your minor child’s W-2 in 2026 and legally strip every dollar of federal income tax and payroll tax off the top.
Pay your kid $15,000 to do real work in the business, and neither of you owes the IRS a dime on those wages. The strategy is called the “hire your kid” rule, and it hides in plain sight inside two sections of the tax code most business owners never read. The Buried Benefit Here is how the math works.