So you have a home based business and you have kids. Are they old enough to help out in the business? If so, consider paying them on the books. This can be used as an alternative to paying them an allowance or as a supplement to their allowance.
According to Diane Kennedy at TaxLoopholes.com, you can pay your kids up to $5,350 per year before they will be subject to any federal tax deductions or obligations. Those ‘kid wages’ can be a tax deduction for you and can save you money on your self employment tax. Furthermore, they can help reduce the amount on which you have to pay income tax.
Now that’s not a whole lot of tax savings, but every little bit helps and if your kids are old enough to help with the business, why not set up some kind of pay for them? Of course make sure you make it official and keep proper records of their ‘job’ and responsibilities within your home-based business. Not only will this help save you a bit of money but it can help prepare your kids for the real world and get them ready to face what lies ahead for them.