Hiring Your Child as an Employee in Your Florida LLC: Tax Benefits and Rules

One of the lesser-known tax strategies available to Florida small business owners - particularly those with sole proprietorships, single-member LLCs, and family partnerships - is hiring their children as legitimate employees. Done correctly, this strategy can shift income from a higher tax bracket to a lower one, reduce self-employment tax, and provide your child with earned income that can fund a Roth IRA. Done incorrectly, it can trigger IRS scrutiny and result in reclassified income plus penalties.

This guide explains the specific rules that apply in Florida in 2026, including the critical FICA exemption, how the Kiddie Tax affects investment income, what constitutes legitimate work, and what Florida child labor law requires. Tampa Bay area business owners who rely on family labor should read this carefully before putting a child on payroll.

The Core Tax Benefit: Shifting Business Income to Your Child

When you hire your child and pay them a reasonable wage for genuine work, the wage is a deductible business expense that reduces your taxable income. The child reports the wage as income on their personal return. Because children typically have little to no other income, they are in the lowest federal income tax bracket - 10% on income up to the standard deduction amount (approximately $14,600 in 2025, adjusted annually).

The mechanics: if you pay your 16-year-old child $12,000 for legitimate bookkeeping, social media management, or warehouse work, that is $12,000 less in your pocket that would have been taxed at your marginal rate (potentially 22-37%). The child pays little or no income tax on that same $12,000. The family unit's overall tax bill decreases.

The FICA Exemption: The Biggest Benefit - and Its Critical Limitation

For sole proprietors and partnerships (including husband-wife partnerships), wages paid to a child under age 18 are exempt from FICA taxes - both the employer's portion (7.65%) and the employee's portion (7.65%). This is authorized under IRC Sections 3111(c) and 3121(b)(3)(A).

The practical impact: on $12,000 in wages, the FICA exemption saves $1,530 in employer FICA taxes you would have paid and $1,530 in employee FICA taxes your child would have paid. Total FICA savings: $3,060 per year, per child.

Important: if your single-member LLC has elected S corporation tax treatment with the IRS, you lose the FICA exemption. The S-corp election changes how FICA applies. For families whose primary tax strategy involves employing children, maintaining default LLC (disregarded entity) or partnership tax treatment may preserve more benefit than the S-corp election.

What About Florida Reemployment Tax?

Florida reemployment tax (unemployment insurance) also has a family employment exemption. Under Florida Statute Section 443.1216(3)(a), employment of a child under age 21 by their parent is specifically excluded from the definition of "employment" for reemployment tax purposes. This means you do not pay Florida reemployment tax on wages paid to your children working in your Florida business, regardless of entity type.

The Kiddie Tax: Understanding the Limits

The "Kiddie Tax" under IRC Section 1(g) is designed to prevent parents from shifting investment income to children to reduce the family's overall tax bill. Under the Kiddie Tax rules, a child's unearned income (dividends, interest, capital gains) above a threshold ($2,500 in 2025) is taxed at the parent's marginal rate, not the child's lower rate.

The good news: the Kiddie Tax does not apply to earned income - wages your child receives for actual work. If you pay your child $12,000 in wages for real work, that $12,000 is taxed at the child's own rate, not yours. The Kiddie Tax only kicks in if you are trying to shift passive or investment income to the child, not earned wages.

The Kiddie Tax applies to children under age 19, and to full-time students between 19 and 24 who have income below certain thresholds. Once a child turns 19 and is not a full-time student, the Kiddie Tax no longer applies.

What Qualifies as Legitimate Work?

The IRS requires that the work be genuine and that the wages be reasonable for the services performed. Courts have disallowed family employment deductions where the work was not real or the wages were not tied to actual services. Legitimate work for a child in a Florida family business can include:

• Social media management and content creation (for older teens)
• Photography or videography for marketing materials
• Data entry, filing, and basic bookkeeping
• Website maintenance and updates
• Warehouse work, inventory counting, or product packaging
• Cleaning, errand running, or other support tasks
• Customer service or answering phones

The wages must be reasonable - what you would pay any other worker for the same work. Paying your 10-year-old $50,000 per year for occasional filing would not survive IRS scrutiny. Paying a 16-year-old $15 per hour for 15 hours per week of real work is reasonable and defensible.

Documentation Requirements

To protect the deduction and demonstrate compliance with employment law, maintain the following records for every child employee:

• A written job description specifying the role and duties
• Time records (timesheets, punch-in/out logs) showing hours worked and dates
• Work product documentation (screenshots of social media posts, completed data entry, photographs, etc.)
• W-4 form (the child's tax withholding election)
• Proof of payment (direct deposit records or check copies)
• W-2 form issued at year end
• I-9 form (required for all employees, including family members)

Florida Child Labor Law Requirements

Employing your own child does not exempt you from Florida's child labor laws. Florida Statutes Chapter 450 and its implementing rules govern the employment of minors in Florida:

• Work permits: In Florida, minors (children under 18) must obtain a work permit (Employment Certificate) through their school district before beginning employment. Work permits are required even for employment in a family-owned business.
• Hour restrictions: Children under 16 may not work more than 15 hours per week during the school week, and no more than 8 hours on a non-school day. When school is not in session, different (more permissive) rules apply.
• Hazardous work restrictions: Federal and Florida law prohibit minors from performing certain hazardous jobs. Restrictions vary by age and apply regardless of who owns the business.
• Minimum wage: Florida's minimum wage (currently $13/hour in 2025, increasing annually) applies to minor employees. There is no reduced "training wage" for children working in a family business under Florida law.

The Roth IRA Strategy

One often-overlooked benefit of employing your child: the wages create earned income that allows the child to contribute to a Roth IRA. In 2026, the Roth IRA contribution limit is $7,000 (or the child's total earned income for the year, whichever is less). A Roth IRA funded in childhood grows tax-free for decades - the long-term compounding effect is extraordinary.

The parent can make the Roth IRA contribution on the child's behalf, as long as the child has at least that much in earned income. The child does not need to actually deposit their paycheck into the IRA - the contribution simply cannot exceed their earned wages.