Under federal law, there is no minimum age at which you can put your child on payroll if you fully own the business as a sole proprietorship or as a partnership with your child’s other parent, and the work is not hazardous. A seven-year-old shredding documents at your shop can legitimately draw a paycheck. The catches are the type of work, how your business is organized, and whether your records would survive a second look.
Why There’s No Age Floor in a Parent-Owned Business
The Fair Labor Standards Act carves out a specific exception for parent-owned businesses. Children of any age can work for a business entirely owned by their parents, as long as the job isn’t in mining, isn’t in manufacturing (for those under 16), and isn’t on the Department of Labor’s list of hazardous occupations (for those under 18).1U.S. Department of Labor. Fact Sheet 43 – Child Labor Provisions of the Fair Labor Standards Act for Nonagricultural Occupations Filing, cleaning, organizing inventory, appearing in marketing materials, light office tasks — all fair game at almost any age.
The exception only holds if a parent fully owns the business. Bring in a co-owner who isn’t the child’s other parent, or run the business through a corporation, and the standard federal age floors snap back into place: 14 for most non-agricultural work, with hour restrictions until 16 and hazardous-work bans until 18.
The Hazardous Work Line That Never Moves
One restriction survives the parent-owned exemption. No one under 18 can perform work the Department of Labor has designated as hazardous, no matter who owns the company. That list includes operating power-driven woodworking machines, chain saws, circular saws, and band saws, along with hoisting equipment like cranes, derricks, and forklifts.2eCFR. Subpart E – Occupations Particularly Hazardous for the Employment of Minors Between 16 and 18 Years of Age or Detrimental to Their Health or Well-Being
If your business is construction, roofing, excavation, logging, or meatpacking, assume the hands-on work is off-limits until your child turns 18. Office tasks, bookkeeping, and data entry for the same business remain fine. It’s the physical operations that trigger the ban.
Your Business Structure Decides the Tax Break
The age question and the tax-savings question are separate, and parents often confuse them. You can legally hire your six-year-old in a corporation. You just won’t get the payroll tax break that makes the arrangement popular in the first place.
Wages paid to a child under 18 are exempt from Social Security and Medicare taxes only when the employer is a sole proprietorship, or a partnership in which every partner is the child’s parent. Wages paid to a child under 21 by the same kinds of employers are also exempt from federal unemployment (FUTA) tax.3Internal Revenue Service. Tax Treatment for Family Members Working in the Family Business4Internal Revenue Service. Family Employees
If your business is a C-corporation or S-corporation, wages paid to your child are subject to Social Security, Medicare, and FUTA taxes just like any other employee’s, even if you own 100% of the shares. The same is true of a partnership that includes anyone other than the child’s other parent.
Single-member LLCs sit in an uncertain middle. The IRS generally treats a single-member LLC as a disregarded entity for income tax, which points toward the exemption applying, but for employment tax the IRS has at times treated the LLC itself as the employer, which points the other way. If you’re an LLC, ask a tax professional before assuming the savings apply.
What the Tax Savings Actually Look Like
Three things happen when a qualifying business pays a child real wages for real work.
The FICA exemption saves a combined 15.3% on those wages — the employer’s 7.65% and the employee’s 7.65% — that you’d otherwise owe.3Internal Revenue Service. Tax Treatment for Family Members Working in the Family Business The wages are also deductible as a business expense, so they come off your taxable income at your marginal rate. In the 24% bracket, $12,000 in wages to your child cuts your federal income tax by $2,880.
Your child then applies their own standard deduction against the wages. For the 2026 tax year, a single filer can earn up to $16,100 before owing any federal income tax.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments from the One, Big, Beautiful Bill Wages at or under that amount move from your bracket to their zero bracket. State income tax treatment varies, so check your state separately.
Pay a Real Wage for Real Work
Whatever your child’s age, wages have to meet the federal minimum wage or your state’s, whichever is higher. Beyond that floor, pay a rate that reflects the work. If a neighbor’s teenager would earn $15 an hour for the same task, that’s the rate for your child too. Inflating pay past market rates to shift more income into the child’s bracket is exactly what draws IRS attention.6U.S. Department of Labor. Fair Labor Standards Act Advisor – Wages for Youth
The work also has to be age-appropriate. A five-year-old cannot plausibly be doing your bookkeeping. A twelve-year-old can plausibly be shredding, sorting, cleaning, or appearing in a photo for your website. Match the job to what the child can actually do, and match the pay to that job.
Setting Up Payroll
Hiring your child requires the same paperwork as any other new employee. Have them complete a Form W-4 so you can determine federal income tax withholding,7Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate and a Form I-9 to verify identity and work authorization. Pay by check or direct deposit rather than cash. Issue a W-2 at year-end.
Roughly 38 states require minors to obtain a work permit or employment certificate before starting a job.8U.S. Department of Labor. Employment/Age Certificate Some states issue permits through the school district, others through the state labor department, and a few have replaced individual permits with an employer registration system. Check your state before the first paycheck.
Most states also require workers’ compensation coverage for employees. A few carve out narrow exemptions for family members, but coverage is generally a sensible choice regardless: if your child is hurt on the job, workers’ comp pays the medical bills instead of leaving you exposed. Confirm the rules with your state’s workers’ compensation board and your insurance carrier when you add a minor to payroll.
Documentation That Holds Up
Family payroll gets abused often enough that the IRS looks at it more closely than an ordinary W-2 arrangement. Whether the deduction stands or falls comes down to records.
Keep contemporaneous time records showing when your child worked and what they did. The Department of Labor requires employers to record hours worked each day, total hours each week, and the basis for wages paid. For workers under 19, the employee’s birth date has to be recorded too.9U.S. Department of Labor. Fact Sheet 21 – Recordkeeping Requirements Under the Fair Labor Standards Act A time clock, a spreadsheet, or a handwritten log all work as long as the entries are complete and accurate.
Task descriptions matter as much as hours. “Filed invoices and organized supply closet, 3 hours” is the kind of entry that holds up. “Helped out at the office” is not. Retain the records for at least three years from the date the taxes were paid, and keep supporting documents like time cards and schedules for at least two years.