The Power of Employing your Child Illustrated

If you meet these requirements:

  • You are self-employed
  • Your family has health insurance through the Federal Marketplace (healthcare.gov)
  • You hire your college-age child in your self-employed business and pay him or her at least $14,580 during 2024 (or else your child’s total income between all jobs is that amount in 2024)

Then your child can “claim themselves” (i.e. not be your dependent), which allows:

  • The child to get a refundable health insurance “subsidy” equal to the cost of their share of the family’s health insurance (around a $3,300 refund)
  • The child gets a refundable American Opportunity credit (a $1,000 refund)
  • The child can contribute money to their own Indiana 529 fund and get $400 of Indiana tax savings
  • The child can contribute $8,300 to their own Health Savings Account (minor tax savings, but the child will have tax-free growth of those funds for life)
  • The child can contribute $6,500 to their Roth IRA (there are no tax savings, but the child will have tax-free growth of those funds for life)

Caution:  You can’t pay your child more than you would pay anyone else for the same work…so if they don’t work for you, then ignore this idea.