Paying Children & The Augusta Rule
Keep wealth in the family. We evaluate family strategies to ensure they are bulletproof, reasonable, and compliant.
We help business owners and real estate investors evaluate family tax strategies like paying children and using the Augusta Rule. These strategies can create meaningful tax savings, but only when the work is legitimate, the payments are reasonable, the documentation is strong, and the structure supports the tax position.
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Our goal is simple: to help clients separate real planning opportunities from social media tax myths.
Paying Your Children
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Legitimate Strategy Review: We help business owners determine whether paying their children is a worthwhile tax strategy based on the child’s age, work performed, business structure, and potential tax savings.
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Reasonable Compensation: Children must be paid a reasonable wage for real work performed. The pay should be similar to what the business would pay an unrelated person.
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Compliance Guidance: Understand the documentation required: W-4s, I-9s, time records, job descriptions, and annual W-2 reporting.
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Payroll Tax Planning: Wages paid to children may avoid Social Security, Medicare, or federal unemployment taxes under certain structures (but these savings often do not apply for S-Corps and C-Corps).
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Roth IRA Planning: Earned income paid to a child can be used to fund a Roth IRA, turning a family tax strategy into a long-term wealth-building engine.
The Augusta Rule
We help clients determine whether renting their personal residence for 14 days or less may qualify for tax-free rental income.
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Business Rental Review: Understand when your business may be able to rent your personal residence for meetings, retreats, events, or company gatherings.
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Documentation Support: Know what records are needed, including invoices, meeting agendas, minutes, photos, and business purpose documentation.
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Fair Market Rate Review: The rate should be based on comparable event space or local short-term rental rates, not an inflated number pulled from social media.
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Entity Structure Rules: Renting a home to your own business generally requires a separate entity (S-Corp, C-Corp, or partnership). Sole proprietors cannot rent their home to themselves in the same way.