Tax Insight–June 2017 Rita Bhayani
Quick Numbers • For 2017, the annual gift tax exclusion is $14,000 to each person; the gift tax exemption amount is $5,490,000. • The eligible expenses for the child and dependent care credit is capped at $3,000 for one child and $6,000 for two or more children. • For 2017, the maximum wage amount subject to social security tax is $127,200.
Hire Your Children for
the Summer
When your children are under age 18, you are not required to withhold social security and Medicare taxes from their wages. You are not required to pay federal unemployment taxes on their wages either until they reach age 21.
Your children (or grandchildren) must be legitimately involved in the business—not just simply doing family chores. You should keep records of the time worked and make sure their wages are reasonable.
If you are a self-employed business owner, you can take advantage of this underutilized tax-saving strategy. Partnerships are also included in this category if the parents are the only partners. If your business is incorporated, no special rules apply, and your children are subject to normal payroll taxes regardless of their age.
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