Some further discussions about hiring your kids in your business and using their earnings for college through a Roth of Traditional IRA:The IRA may be ignored in measuring parent and student resources for purposes of college financial aid.Monies in the IRA grow tax deferred.The IRA might eliminate some or all of the child’s income from the kiddie tax – child’s income taxed at the parents’ rates.The working child who earns more than the standard deduction benefits from both a tax deduciton for a contribution to a traditional IRA and that IRA’s inside buildup of tax-deferred savings.
Brian’s Tax Musings
If you have a business, you can hire your kids and can invest the earnings to get benefits for college. I will discuss some advantages of using a Roth or traditional IRA, depending on the child’s earnings, over the next few days.Did you know your child can withdraw Roth or Traditional IRA funds without penalty to pay qualified higher education expenses such as tuition, fees, books, supplies and room and board.Tomorrow I will discuss some more advantages of hiring your kids and using an IRA for college.
Brian’s Tax Musings
If you use your personal car for business purposes, how can you write off your expenses? If you have another entity (S or C Corp or LLC) you are supposed to submit an expense report to the entity either for mileage (51 cents a mile) or your actual expenses for the mileage, which can be difficult to calculate. If the entity pays your auto bills for you, that is a personal payment, either a draw or a distribution or shareholder loan depending on the entity. It is better to submit and then reimburse rather than have the entity pay; just for clarity and having the documentation directly tie to a check.