If you have children under age 18 and run your business as a sole proprietorship or partnership, you could unlock major year-end tax savings by putting your kids to work in the business.

And if you operate as an S corporation or C corporation, hiring your children still creates meaningful tax benefits you should not overlook.

This article outlines five profitable year-end tax strategies that apply if you’re getting married or divorced, have children helping in your business, or frequently give financial support to relatives and friends.

1. Put Your Children on Your Payroll

If your children under age 18 performed legitimate work for your business this year, you should pay them—with a W-2.

Here’s why:

For a parent operating as a Schedule C sole proprietor, single-member LLC (Schedule C), or spousal partnership, wages paid to a child under 18 are:

• Fully deductible to the business
• Exempt from federal payroll taxes for both parent and child
• Exempt from most state payroll taxes

If you operate through a corporation, payroll taxes do apply, but the overall family tax benefit remains strong.

Thanks to the 2025 One Big Beautiful Bill Act (OBBBA) standard deduction, your child can earn up to $15,750 tax-free from your business.

Your child can also contribute up to $7,000 to:

1. A Traditional IRA (tax-deductible)
2. A Roth IRA (not deductible, but earnings grow tax-free)

Example

Your 14-year-old earns $11,800 in legitimate W-2 wages from your sole proprietorship.
You deduct $11,800, saving $4,366 at a 37% tax bracket.

Your child:

• Pays zero payroll taxes
• Pays zero federal income taxes (covered by the $15,750 standard deduction)
• Can contribute up to $7,000 to a Roth IRA

Your family unit keeps the entire $11,800 plus the $4,366 tax savings.

Important

To avoid payroll taxes, never issue your child a 1099. Use a W-2.

For deeper details, see Get Paid: Hire Your Child and Use Business Tax Deductions to Build Your Child’s College Fund.

The kiddie tax does not apply to W-2 wages. It applies only to unearned income (interest, dividends, etc.).

2. Get Divorced after December 31

For tax purposes, if you’re married on December 31, you are considered married for the full year.

Although many tax differences between married and single filers have narrowed, married filing jointly remains advantageous in most situations.

If you are planning a divorce, postponing it until next year may save thousands. The only way to know is to run a before-and-after tax comparison.

Avoid married filing separately unless absolutely necessary — it often increases your tax bill.

Alimony Warning

Under post-2018 TCJA rules:

• Payors get no deduction for alimony
• Recipients do not include alimony as taxable income

These changes significantly affect divorce planning.

3. Stay Single to Increase Mortgage Deductions

Two unmarried individuals can deduct more mortgage interest than a married couple, depending on when the mortgage originated.

If you and a partner jointly own a home and purchased it on or before December 15, 2017, each person can deduct interest on up to $1 million of mortgage debt—totaling $2 million combined.

If you marry, the limit drops to $1 million total.

For homes purchased after December 15, 2017, the TCJA lowered the mortgage limit to $750,000—or $1.5 million combined for unmarried co-owners.

4. Get Married on or before December 31

If you’re planning to marry in 2026, consider moving up the date.

Being married on December 31 means you're treated as married for the entire year, and married filing jointly can create significant tax savings depending on income levels, deductions, and filing status.

Run the numbers both ways to know for sure.

5. Make Use of the 0 Percent Tax Bracket

This strategy has changed over time due to the kiddie tax now applying to many students through age 24.

But it still works perfectly with:

• Parents
• Grandparents
• Other adult loved ones in low tax brackets

If the recipient has taxable income below $48,350 (single) or $96,700 (married), they fall into the 0% long-term capital gains bracket.

Example

You gift Aunt Millie stock worth $20,000 that you originally bought for $2,000.

Aunt Millie sells it and pays zero capital gains tax.

Had you sold it yourself, you would have paid $4,284 in federal taxes (23.8% of the $18,000 gain).

If the gift exceeds the $19,000 annual exclusion, the excess applies against your $13.99 million estate tax exemption. Married couples can split gifts and use a combined $38,000 exclusion.

Takeaways

If you have a child under 18 and run your business as a Schedule C sole proprietor or spousal partnership, hiring your child is one of the most powerful tax strategies available:

• Zero payroll taxes
• Zero federal income taxes
• Ability to shift income into a Roth IRA or Traditional IRA

Corporation owners still benefit, even though payroll taxes apply.

If you are getting married or divorced, consider how mortgage interest limits, filing status, and post-TCJA alimony rules affect your tax outcome.
Run the comparisons before making major decisions.

Finally, when helping family financially, gifting appreciated stock to someone in the 0% capital gains bracket is a simple and effective way to eliminate capital gains tax entirely.

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