How To Save Up To $7,985 By Paying Your Children!
Many people ask just how does the new tax laws benefit me. Well, in just one instance, you can save up to $5,600 in 2018 if you have a home based business and 2 children between the ages of 7 and 17.
You see, the IRS allows you to pay your children up to the standard deduction amount each year from your sole proprietorship business. These businesses include Young Living, Mary Kay, Tastefully Simple, and the like. The payments are deductions from your business income and are non taxable to your children. The money paid to your children can be used to pay for school tuition, clothing, meals, and other items that you will pay for anyway!
The two changes that specifically will benefit you are the increase in the child tax credit and the increase in the standard deduction.
Let’s look at an example to show how much you can save:
Additional deductions from your business $24,000 ($12,000 for each child)
Tax savings assuming a 15% tax rate and
15%self employment rate savings $7,200
Increase in child tax credit $2,000
Total Tax Savings $9,200
Decrease in tax from reduction in exemptions $1,215 ($4,050 x 2 x 15%)
Net tax savings for your family $7,985
The portion that the new tax law is responsible for is about $4,385. That has to be one of the biggest tax cuts I’ve ever seen. That amount does not even take into account the rate changes!
This example is taking the tax savings to the maximum amounts and assumes that you are making a great deal of profit in your business. However, even if you have a smaller business AND you only pay your children half the amount you can, you will STILL save about $3,600 per year by paying your children.
This is just ONE strategy of saving thousands on your taxes EVERY year with a home based business. CLICK HERE for a free report on all of the rules on how to pay your children as well as a worksheet & time card!
Cheers
Steve
Hey Steve,
Great article on reducing taxes. Where I am from we don’t have this tax law but would be interesting for me to research and see what exactly we have!
This article has opened my eyes.
Love the simple maths and example used!
Ravi
Ravi:
If you are in a business where you sponsor people from America, this could help them make a decision to get into business with you.
Steve
Thanks Steve for this helpful information. It’s great to know that you can provide this information so we don’t have to go searching the internet for it. The example you provided is short and to the point. Thanks again.
Shantaye:
Awesome! It’s there to use! save as much a s you can.
Thx
Steve
Great Info Steven. I do not have kids currently hahaha. Although I plan to have between 3-5 ;). This explains a lot about how kids save taxes. I always wondered why people get so serious about claiming kids and tell me to claim some kids. Now I get the full the picture.
Thank you.
Edmond:
Yes! And kids can be helpful in mowing the lawn too!
Steve