Maximize Tax Savings by Employing Your Kids in Dentistry
As a dentist, you work hard to run your practice and take care of your patients. But did you know that hiring your children to work for you can also help you save money on taxes? That’s right—bringing your kids into the family business (even part-time) can be both a valuable learning opportunity and a smart financial move.
Why Hiring Your Kids Can Be a Smart Tax Strategy
You’re probably thinking, “Is that even legal?” Yes, it is—so long as you follow the IRS rules. When done properly, employing your children can:
- Reduce your taxable income
- Provide tax-free income to your child
- Build savings for your child’s future
- Teach your children real-life work skills
This strategy works especially well for family-owned businesses like dental practices. And the best part? It’s easier to do than you might think.
How the Tax Savings Break Down
Here’s how it works. You pay your child a reasonable wage for real work they do in your office. This could be things like:
- Filing paperwork
- Cleaning and organizing supplies
- Managing social media or doing data entry
- Welcoming patients or passing out brochures at events
As long as your child is under 18 and you’re a sole proprietor or a partnership between spouses, you don’t even have to pay Social Security, Medicare, or FUTA taxes on their wages. And if you pay them under the standard deduction—up to $14,600 for 2024—they won’t owe any federal income tax either.
Real-Life Example
Let’s say Dr. Jones, who owns her dental clinic, hires her 15-year-old daughter to help after school. She pays her daughter $6,000 over the course of the year. Dr. Jones gets to deduct that $6,000 from her business income, potentially saving $2,000 or more in taxes depending on her tax bracket. Meanwhile, her daughter can use that money to save for college or contribute to a Roth IRA—completely tax-free.
IRS Rules You Need to Follow
Of course, like with anything tax-related, you need to keep good records and follow the rules:
- Pay a reasonable wage for the work done—not $50/hour for stapling papers.
- Track hours worked and the type of tasks completed.
- Issue a W-2 if the total wage warrants it.
- Keep everything documented in case the IRS asks.
Need help setting this up? A dental CPA can guide you step by step to make sure you’re doing it right.
Bonus Perks: More Than Just Saving Taxes
Beyond the tax savings, hiring your kids opens up so many benefits. They learn about responsibility, time management, and how your dental practice works behind the scenes. You build stronger family ties while preparing them for the future. And yes—you might even get some help promoting your practice on TikTok!
Start Small—and Save Big
If you’ve never thought about employing your kids at your dental practice, it might be the tax-saving trick you didn’t know you needed. With the right approach and a little planning, you can reduce your tax bill, teach your children important skills, and keep more money in the family.
So, what are you waiting for? It may be time to hand your child a task list—and start maximizing your dental practice’s tax savings today.
