Back to Articles
Business Tax6 min readMar 17, 2026
Tax Benefits of Hiring Your Spouse or Family Members
Hiring family members in your business can create valuable tax benefits — if done correctly. Here's how to do it right.
Tax Benefits of Hiring Family Members
Hiring Your Spouse
Benefits:
- Shift income to a lower-bracket spouse
- Provide tax-deductible employee benefits (health insurance, retirement plan)
- Health insurance for the family becomes fully deductible as a business expense
Requirements:
- Spouse must do legitimate work
- Pay reasonable compensation for the work done
- Follow all payroll rules
FICA Note: If your business is a sole proprietorship or partnership where both spouses are partners, wages paid to a spouse ARE subject to FICA.
Hiring Your Children
Benefits:
- Income taxed at child's lower rate
- Child uses their standard deduction ($14,600 in 2025)
- If under 18 working for parent's sole proprietorship: exempt from FICA and FUTA
Requirements:
- Must do real work appropriate for their age
- Must pay reasonable wages for the work done
- Under 18: Cannot work in hazardous jobs
Example savings: Pay your child $14,600 in wages:
- Business deducts $14,600 (saving ~$5,400 in taxes at 37% rate)
- Child pays $0 in tax (within standard deduction)
- Net family savings: ~$5,400
Documentation
Keep time records and pay by check or direct deposit — never cash only.
Family business? We can structure compensation to maximize tax savings legally.