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Thanks to the New Tax Law There's Never Been a Better Time to Hire Your Kid But please, don't put your six-year-old behind the wheel of a forklift, OK?

By Gene Marks Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

Geber86 | Getty Images

As a certified public accountant, I often get asked for ways to save on taxes. Thanks to the new tax reform bill, there are puh-lenty. But there's one tax benefit in particular that I've been recommending to business owners of late, mainly because schools are about to let out for the summer: hire your kid!

Don't let some other employer steal your children this summer! What, you think some pimply manager at the local fast food restaurant is going to teach your child all the things about life and the meaning of a hard day's work like you can? No way. This is a golden opportunity for you. You are a devoted parent who wants to raise good, hard-working, law-abiding and conscientious children. Of course, saving a few bucks on your tax bill wouldn't hurt either, right? This year, you can save big.

Related: 7 Last Minute Tax Tips That Will Save You Money

Why? Thanks to tax reform, the 2018 standard deduction was increased to $12,000. Last year it was $6,350. That means that you can now pay your child as much as $12,000 this summer. Assuming there's no other earnings, when your accountant does your kid's returns at year end, he'll just net that income against the standard deduction and boom! No taxable income. Not only that but depending on your company's tax structure (i.e. if you're a proprietorship or partnership) your kid's income may be exempt from social security, Medicare and the federal unemployment tax too. State and local tax rules, however, may vary depending on where you live.

I'm not through. Ready? Your business also gets a tax deduction! It's a bona-fide business expense. So, to recap: your kid makes tax free money. You save money on your taxes. It's a win-win. But before you start texting your son or daughter the great news about the upcoming summer, I do have a few suggested ground rules for you.

First, I recommend not putting your six-year-old behind the wheel of a forklift in your warehouse. True, she could probably do a better job than some of your guys working out there right now. But your kid needs to be of reasonable working age. Middle school and up to 18 years old is fine. Assign them reasonable responsibilities. I suggest light warehouse duties, filing work, database tasks and cleaning out his or her bedroom. (OK, the time spent on the last one wouldn't qualify for a tax deduction but just have her do it anyway. It's a disgrace.)

Related: The Surprising Benefits of Hiring Your Kids

Second, you have to pay your kids a reasonable wage and treat them like any other employee. She may be your little baby-girl, but trust me, your employees are going to be the ones crying if they find out she's allowed to leave early or being paid at a higher rate than they are. The IRS isn't going to like that either, particularly if it's disproportionate to what others her skill level would be earning. It doesn't have to be your state's minimum wage (although it's not a bad place to start). But it shouldn't be excessive.

Also, have your payroll service deposit her earnings -- directly and without delay -- to a savings account that you set up for her. I'd recommend a 529 plan where the proceeds from her paycheck can grow tax-free and be used to pay for her college tuition some day in the future, assuming you don't ground her permanently first for going out with that Peter kid after you've told her a million times to stay away from him because he's only interested in one thing. Won't they ever learn?

Related: Put Your Family on Payroll Before the End of the Year to Save Big

Finally, enjoy the moment. She's only this age once. Thanks to our wise and caring representatives in Congress, you've now got the opportunity to have her around the entire summer. In a few years she'll be who-knows-where doing God-knows-what. Use the opportunity to spend some time together. Grab some lunches. Give her work that she can do nearby. Check in for a hello or a chat. Give her some love.

She may not say so now. But she'll always remember that great summer she had with her dad -- even when she inevitably puts you away in a nursing home.

Gene Marks

Entrepreneur Leadership Network® VIP

President of The Marks Group

Gene Marks is a CPA and owner of The Marks Group PC, a ten-person technology and financial consulting firm located near Philadelphia founded in 1994.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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