As a real estate investor and landlord, you’re always looking for ways to cut costs, improve the bottom line, and increase your ROI.
As a parent, you’re always looking for ways to teach your children about financial discipline and responsibility so that they mature into wise adults.
What if you could combine these objectives and see benefits in both areas? Depending on the circumstances and ages of your children, you might be able to hire them to help you manage your Houston rental properties and enjoy some nice financial incentives as a result.
There are a number of compelling reasons to hire your children to work for you, including:
This is a question that gets asked a lot. While the IRS allows you to pay your children for legitimate work and lower your taxable income, there are some common sense rules and requirements to keep in mind.
First, your children need to be at least 7 years old to consider this strategy. And, the older they are, the less likely it is that the IRS will question what you’re doing. You also need to pay them a reasonable salary – meaning the same amount you would pay someone if they weren’t in your family.
For example, if you would hire a stranger for $15 per hour to answer emails for you, it’s not reasonable to assume you would pay your child $100 per hour. That’s going to raise some red flags. Always keep the salary in line with a normal expected pay range.
While there technically aren’t any rules to how much you can pay your children per year, there are some limits you’ll want to keep in mind. For one, the standard deduction amount for single individuals is $13,850. That means a child can make up to that amount and not owe any Federal taxes.
However, you could also open up an IRA or 401k for your child and combine the annual contribution with the $13,850 to effectively increase how much you can pay per child without incurring any taxable income on their part.
All of this can get a little complicated, so you’ll want to consult with a CPA to learn more about how much you can/should pay to make sure you’re maximizing tax savings and playing within the rules.
If you’re going to hire your children to help you manage your Houston rental properties, there are some best practices to keep in mind:
Very few parents are ever in a situation where they’re able to hire their children and teach them work ethics and financial responsibility. If you’re in a place to do this – and you also get to benefit from tax savings – it’s a no-brainer! Just make sure you consult with a CPA to figure out all of the nitty-gritty details.
Your kids can do certain tasks for you, and even provide a nice little tax break for your business, but they’re no replacement for having a trained and skilled Houston property manager on your team. Make sure you’re covering all of your bases by partnering with the right professionals.
At Green Residential, we take Houston property management seriously. We’ve been in the industry longer than just about any other real estate company in the area, and would love to partner with you. Contact us today for a free property analysis!