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.
The New Standard Deduction
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.
Extra Benefits for Sole Proprietors
If you're a sole proprietor or operate a spouse-only partnership, the advantages are even greater. 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). That means you can deduct their wages while avoiding employment tax costs entirely.
Example of the Savings
Suppose 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.
What About Corporations?
Even if you operate as an S or C corporation, the strategy still delivers benefits. While FICA and FUTA taxes apply, you receive a deduction for those payroll taxes, and your children still pay no federal income tax on their wages. In one case study, a family netted $9,663 in government-paid tax savings after accounting for the payroll taxes paid and deductions received.
The Bottom Line
Hiring your children can create a true win-win: they earn tax-free income, and you reduce your tax bill. With OBBBA's expanded standard deduction, this long-standing strategy becomes even more valuable starting in 2025.