Hiring your own kids does three things at once: it shifts income out of your bracket and into their $0 bracket, it skips payroll tax entirely if your MSP is the right kind of entity, and it hands them earned income that can seed a Roth IRA. Pay a fair wage for real work, keep it under the standard deduction, and the whole amount lands tax-free. Adjust the inputs and watch the household savings respond.
A wage your child earns is deductible to your business and, up to the standard deduction, taxed at zero to them. That is the arbitrage: your rate on the way out, their $0 rate on the way in.
Earned income is the only key that unlocks a Roth IRA. Once your child has a real paycheck, they can fund one, and decades of tax-free compounding do the rest.
Watch the shape. A few years of early contributions sit almost flat, then compounding takes over and most of the balance is built in the final stretch before retirement.
Reasonable wages, real work, and the right entity are what make this hold up. Talk to a CPA who works with MSPs all day and we will tell you straight.
This calculator is an educational estimate for MSP owners, not tax advice, and it does not create a client relationship. The results assume your child performs real, age-appropriate work, that wages are reasonable for that work and documented, and that you run them through payroll with the proper filings. The Social Security and Medicare exemption applies only to a child under 18 employed by a parent's sole proprietorship or by a partnership in which every partner is a parent of that child. It does not apply if the business is a corporation or has any non-parent partner. Roth projections use a flat assumed growth rate, ignore fees and future law changes, and are illustrative only. Figures reflect tax-year 2026 amounts. Confirm the details with your CPA before acting.
