If you own a company that is a sole proprietorship, or you and your spouse are the sole partners in a partnership, then you can employ your child under 18 years of age without paying social security or Medicare taxes. They are also not subject to FUTA tax. This will put a little extra spending money in their pocket and will allow you a business deduction for labor at the same time.
Keep in mind, though, your child will still be subject to income tax. The child can still take a standard deduction which allows the first $6,100 of earned income to be tax free. In the case of Michigan, an individual claimed as a dependent is still eligible for a $1,500 exemption for the state return. Depending on how much they will be making, they may have a small amount of income tax due but not having to pay social security or Medicare taxes will be a big save for both you and the child!
This is a guest post by Emily Fishwick of Numerico, PC.
Note that for liability reasons, Demorest Law Firm, PLLC recommends establishing an LLC or corporation, rather than a sole proprietorship or partnership, but you should always consult a tax advisor regarding the potential tax consequences of any business.
