Hire Your Kids Tax Calculator (2026 Rules)

Tell Dad about the job

✓ Figures checked Oct 31, 2026

How to do it right

Hiring your kids is one of the friendliest parts of the tax code for family businesses. Treat it like any other job and it holds up beautifully.

Real work. Jobs that fit their age and that you’d otherwise pay for: cleaning the shop, filing, social posts, product photos, packing orders, answering email.
Reasonable pay for the job. Pay what you’d pay someone else for the same work. A teen doing filing earns a filing wage.
A timesheet. Dates, hours and what they did. A simple shared sheet or the time tracking in your payroll app works. A short written job description helps too.
Run it through payroll. A W-4 on file, real paychecks from the business account and a W-2 at year end. Payroll handles the withholding and filings for you.
Follow child labor rules. Keep them off hazardous tasks and check your state’s rules for their age.¹¹
Fund the Roth. Open a custodial Roth IRA and put in up to their pay or $7,500, whichever is less.

Your child will be a real employee, so the first-hire checklist and the first-employee guide cover the paperwork. Running an S-corp? Check your own pay with the S-corp salary calculator.

Put your new hire on payroll

A paycheck, a pay stub and a W-2 make this easy to show and easy to repeat. Set up payroll in Gusto through our link. Gusto’s referral terms say the $100 Visa gift card arrives within 30 days of your first paid payroll. Moving from another provider? The free Switch Planner gives you a step-by-step plan first.

Set up payroll in Gusto →Build my switch plan#ad, we earn a referral reward

$100 Visa gift card from Gusto when you switch or sign up through our link (by Jan 31, 2027)

The fine print, in plain words: sign up for Gusto payroll through our link by Jan 31, 2027 and run at least one paid payroll. Gusto sends the card within 30 days of your first paid payroll invoice, and your account has to be open when it goes out. The gift card comes from Gusto, not from us, and we don’t add a bonus of our own. Read Gusto’s terms.

Ask Dad

Questions about hiring your kids? Ask Dad.

Why does Dad answer payroll questions for free? Because hiring people is one of the best things you can do, and fear of payroll shouldn’t stop anyone.

Why listen to us? Dad’s a cartoon, but the people behind him are real business owners: a small family business that does a little of everything, from real estate and investments to options and consulting. We learn by doing, not theorizing. We run a small team on payroll and switched payroll providers ourselves after years of slow support, a clunky dashboard and chasing year-end tax forms. Every guide here links to the IRS or Gusto source behind it.

Scared you’ll miss a payroll if you switch? You won’t be doing it alone, and we’ll help you get every step right.

Ask Dad: [email protected]Real answers from real small-business owners. Not CPAs or advisors, and not tax or investment advice. Prefer X? DM @PayrollDadHQ.

How Dad does the math

Federal rules for 2026, in plain words. It’s an estimate; check with your CPA for your situation.

Your child’s income tax. The 2026 standard deduction for a single filer is $16,100.¹ A dependent’s standard deduction is their earned income plus $450, up to that regular amount, so wages up to $16,100 are typically free of federal income tax when they’re the child’s only income.² Above that, Dad uses the 2026 single brackets: 10% to $12,400 of taxable income, then 12%.
Payroll taxes by business type. In a sole proprietorship, or a partnership where every partner is the child’s parent, a child under 18 doesn’t owe Social Security or Medicare, and under 21 the business doesn’t owe FUTA. A corporation (S or C), or a partnership with any other partner, pays normal payroll taxes at any age. Income tax withholding applies either way.³
Payroll tax rates. Social Security 6.2% each side up to $184,500 and Medicare 1.45% each side⁴⁵; FUTA 0.6% on the first $7,000 after the usual state credit.⁶
The family math. Wages, and any payroll taxes the business pays on them, come off the business’s profit. For a sole prop, partnership or S-corp, that saves income tax at your bracket. A C corporation saves at the flat 21% corporate rate.⁷ A sole prop or partnership also saves self-employment tax: 15.3% on 92.35% of the amount while your SE earnings are under the wage base, or 2.9% above it.⁸ Then Dad subtracts any tax your child or the business pays on the wages. State taxes are not included.
The Roth IRA. For 2026 the IRA limit is $7,500⁹, or your child’s taxable compensation if that’s less. There’s no age limit, and the IRS notes a family member can make the contribution on the child’s behalf.¹⁰
Child labor rules. Federal rules give parents’ own businesses extra room with young workers, but hazardous jobs are off-limits, and where a state rule is stricter, the state rule applies.¹¹

Questions

How much can I pay my child tax-free in 2026?

Up to $16,100, the 2026 standard deduction for a single filer, is typically free of federal income tax for your child when wages are their only income.¹

Do I have to withhold Social Security and Medicare for my child?

Not if your child is under 18 and the business is your sole proprietorship or a partnership owned only by you and your child’s other parent. Corporations withhold and pay them at any age.³

Does this work with an S-corp?

Yes, with normal payroll taxes. The wages still come off the profit that flows to you, so you save at your bracket, and your child still gets the standard deduction. The payroll tax just comes out of the win.

Can my child open a Roth IRA?

Yes. Anyone with earned income can contribute, up to the 2026 limit of $7,500 or their pay if less.¹⁰ A parent usually opens it as a custodial account.

How young is too young?

The work has to be real and fit their age. Younger kids can do simple, safe tasks. Keep the timesheet and the pay in line with the work, and check your state’s child labor rules. Your CPA can help you set the number.

Sources, checked Oct 31, 2026

Every number on this page comes from one of these pages. Prices change; if a vendor updates its page, theirs wins.

Hire-your-kids tax calculator