Help with hiring family members tax benefits

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Help with hiring family members tax benefits

Elvin William
Member since 2021 · 42 posts · 33 votes

Hello, I'm looking at hiring my in laws for my LLC rental property business. Question is, how can I take the step and how do I do that? Also, do I really get tax benefits for hiring my family member. Can I do write off on that income as business expenses? What's the pro and cons on doing this? Is this smart doing this? Thanks.

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Jason WatsonBusiness Member
CPA · Colorado Springs, CO · Member since 2024 · 98 posts · 83 votes
2y

Are your in-laws contractors? Or are they going to be helping out here and there?

Certainly paying them a wage or fee reduces your rental income... but then they have to recognize that income (perhaps at a lower tax rate?).

What specifically will they be doing? What do they do now? Are they expecting to pick up an income tax liability from your payments?

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  • Jason WatsonBusiness Member
    CPA · Colorado Springs, CO · Member since 2024 · 98 posts · 83 votes
    2y

    Are your in-laws contractors? Or are they going to be helping out here and there?

    Certainly paying them a wage or fee reduces your rental income... but then they have to recognize that income (perhaps at a lower tax rate?).

    What specifically will they be doing? What do they do now? Are they expecting to pick up an income tax liability from your payments?

    [email protected]719-387-9800
    WCG CPAs & Advisors4.5101 Reviews
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  • Elvin William
    OP
    Member since 2021 · 42 posts · 33 votes
    2y
    Quote from @Jason Watson:

    Are your in-laws contractors? Or are they going to be helping out here and there?

    Certainly paying them a wage or fee reduces your rental income... but then they have to recognize that income (perhaps at a lower tax rate?).

    What specifically will they be doing? What do they do now? Are they expecting to pick up an income tax liability from your payments?


    Thanks for commenting. My in law will help with my business, question is with what. I need them to babysit my kids while I continue doing my rental property, like buying and looking at cost to rehab and other stuff. What does my in law have to do to like work wise to be my employee? I'm very new to this. I have LLC. I heard that, if I hire my in law, I will get tax benefits and they pay lower bracket. What paperwork should I file or filled up to start doing this?

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  • Jason WatsonBusiness Member
    CPA · Colorado Springs, CO · Member since 2024 · 98 posts · 83 votes
    2y

    You are getting into a lot of what-if's and "it depends." Talk to a qualified tax pro... you might be heading for trouble otherwise.

    [email protected]719-387-9800
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  • Elvin William
    OP
    Member since 2021 · 42 posts · 33 votes
    2y
    Quote from @Jason Watson:

    You are getting into a lot of what-if's and "it depends." Talk to a qualified tax pro... you might be heading for trouble otherwise.

    Thanks..I have a appointment with one in a week. 
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  • Deltrease Hart-AndersonBusiness Member
    West Columbia · Member since 2021 · 8 posts · 3 votes
    2y
    Quote from @Elvin William:

    Hello, I'm looking at hiring my in laws for my LLC rental property business. Question is, how can I take the step and how do I do that? Also, do I really get tax benefits for hiring my family member. Can I do write off on that income as business expenses? What's the pro and cons on doing this? Is this smart doing this? Thanks.

    Depending on what your in-laws job descriptions will be will determine your next steps.  So your first "next step" would be to create their job descriptions. 

    If you have taxable real estate income, then yes there will be tax benefits. Tax benefits specifically related to family members is a bigger topic. That all depends on different factors: Will they be 1099 workers or W-2 workers? Is the goal to create sustainable jobs for them or just to help you out? Are they looking for tax saving strategies themselves or are they already at the lowest tax rate possible? 

    It can be smart to hire in-laws from a tax standpoint if there is not additional tax burden on your in-laws.

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  • Elvin William
    OP
    Member since 2021 · 42 posts · 33 votes
    2y

    So they are in the lowest tax bracket. Hire them to help them out. They will be W2. They won't have any tax strategy. 

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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    2y
    Quote from @Elvin William:
    This is not a business expense. You might qualify for a "dependent care credit" but it is not really a tax strategy.
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