May 21, 2025
Summer Employment for Your Child
Article Highlights
- Higher Standard Deduction
- IRA Options
- Typical Summer Jobs for Young Adults
- Self-Employed Parent
- Employing Your Child
- Tax Benefits
Summer jobs for kids offer more than just extra cash—they provide valuable life lessons and skills that can benefit young individuals in their personal and professional lives. Whether they are saving up for a special purchase, gaining work experience, putting the money away for the future or simply looking to spend their time productively, summer jobs can be a transformative experience.
Summer is almost here, and your children may be looking for a summer job. The standard deduction for single individuals increased from $14,600 in 2024 to $15,000 in 2025, meaning your child can now make up to $15,000 from working without paying any income tax on their earnings.
In addition, they can contribute the lesser of $7,000 or their earned income to an IRA. If they contribute to a traditional IRA, they could earn up to $22,000 tax free, by combining the standard deduction and the maximum allowed deductible contribution to an IRA for 2025 of $7,000. However, looking forward to the future, a Roth IRA with its tax-free accumulation and distributions would be a better choice. But the contributions to a Roth IRA are not deductible.
Even if your child is reluctant to give up any of their hard-earned money from their summer or regular employment, if you have the financial resources, you could gift them the funds to make the IRA contribution, giving them a great start and hopefully a continuing incentive to save for retirement.
Examples of traditional summer and even some year-round part time jobs for young adults:
- Fast Food Services – Flipping burgers and conjuring up lattes and cappuccinos are iconic summer jobs and a quintessential entry-point into the workforce for many young individuals. Working at a fast-food chain can provide teenagers with valuable skills and experiences that serve as a strong foundation for future careers. The worker’s employer will issue a Form W-2 that reports their year’s wages and any income tax and FICA withheld. If the worker received tips, these may have already been included in the reported wages, but if not, then the tips will need to be reported separately on their tax return, so the worker should keep a record of the tips received.
- Babysitting - teaches responsibility and childcare skills. Kids can start by offering their services to neighbors or family friends, gradually building a reputation as a reliable care provider. It's essential to know basic first aid and undergo a safety course to gain the trust of parents. The income earned while babysitting may be taxed, but generally sitters don’t receive W-2s from the parents who have hired them to tend to their children. Even so, the income may still be reportable, depending on the sitter’s total income for the year.
- Lawn Mowing and Gardening - Lawn mowing and gardening are great ways for kids to earn money while enjoying the outdoors. These jobs teach important skills such as time management, work ethic, and basic business management. Kids working for themselves can offer package deals for regular services to maintain a steady stream of income. If the child is hired by a company that provides gardening services, the child’s income should be reported on a Form W-2; otherwise, just as with a babysitter, the income may still be reportable, depending on the child’s total earnings for the year.
- Lifeguarding - For older teens who are strong swimmers, lifeguarding at a community pool or beach can be an ideal summer job. It requires certification in CPR and first aid, which provides vital life-saving skills. The child should be treated as an employee and receive a W-2 form from the employer.
- Pet Sitting and Dog Walking - Animal lovers can turn their passion into a summer job by offering pet sitting and dog walking services. This job teaches responsibility and empathy towards animals while allowing kids to enjoy the company of pets. Earnings from these activities may be reportable and taxable, depending on the amount earned, and it is unlikely that the child will be issued a Form W-2.
- Art and Craft Sales - Those who have a talent for art and crafts can create and sell their product at local markets or online platforms. This job fosters creativity and teaches marketing and entrepreneurship skills. If the artist is doing this activity as a hobby, all of the sales will be reportable if they are required to file a tax return. If the child intends this to be a business, then only the excess of the sales amount over the cost of materials and supplies would be taxable. Of course, in either scenario if the child’s standard deduction is greater than the income from their sales, none of this income will be taxable.
- Online Tutoring - Kids who excel in academics can offer online tutoring services to younger students. This job reinforces their own knowledge while helping them develop teaching and communication skills. The child should keep track of their earnings from these services, as they may be reportable depending on the child’s total income for the year.
- Social Media Management - Teens who are adept at social media can offer management services to small businesses looking to expand their online presence. This can involve content creation, scheduling posts, and engaging with followers. If the teen is hired as an employee, the employer will issue a Form W-2 at the end of the year. The teen is “free-lancing” the earnings from this activity should be documented as they may need to be reported on the child’s tax return.
- App or Game Development - For tech enthusiasts, creating apps or games can be both a learning experience and a profitable venture. Plenty of free resources and platforms are available to help kids get started with coding and development. Whether the child is doing this as a hobby or intending it to be a business and is being compensate for their time or expertise other than as an employee, the child should keep a record of their earnings as it may be taxable.
These are just a few examples of jobs typically available to young adults and the associated tax implications of earnings from these types of work.
Self-employed Parents Employing a Child - With vacation time just around the corner and employees heading out for their summer vacations, if you are self-employed, you might consider hiring your children to help out in your business. Financially, it makes more sense to keep the family employed rather than hiring strangers, provided, of course, that the family member is suitable for the job.
Rather than helping to support your children with your after-tax dollars, you can instead hire them in your business and pay them with tax-deductible dollars. Of course, the employment must be legitimate and the pay commensurate with the hours and the job worked. A reasonable salary paid to a child reduces the self-employment income and tax of the parents (business owners) by shifting income to the child.
Example: Let’s say you are in the 24% tax bracket and own an unincorporated business. You hire your child (who has no investment income) and pay the child $16,000 for the year. You reduce your income by $16,000, which saves you $3,840 of income tax (24% of $16,000), and your child has a taxable income of $1,000, $16,000 less the $15,000 standard deduction, on which the tax is $100 (10% of $1,000).
If the business is unincorporated and the wages are paid to a child under age 18, the pay will not be subject to FICA (Social Security and Medicare taxes) since employment for FICA tax purposes doesn’t include services performed by a child under the age of 18 while employed by a parent. Thus, the child will not be required to pay the employee’s share of the FICA taxes, and the business won’t have to pay its half either.
Example: Using the same information as the previous example, and assuming your business profits are $130,000, by paying your child $16,000, you not only reduce your self-employment income for income tax purposes, but you also reduce your self-employment tax (HI portion) by $429 (2.9% of $16,000 times the SE factor of 92.35%). But if your net profits for the year were less than the maximum SE income ($176,100 for 2025) that is subject to Social Security tax, then the savings would include the 12.4% Social Security portion in addition to the 2.9% HI portion.
A similar but more liberal exemption applies for FUTA, which exempts from federal unemployment tax the earnings paid to a child under age 21 while employed by his or her parent. The FICA and FUTA exemptions also apply if a child is employed by a partnership consisting solely of his or her parents. However, the exemptions do not apply to businesses that are incorporated or a partnership that includes non-parent partners. Even so, there's no extra cost to your business if you're paying a child for work that you would pay someone else to do anyway.
Retirement Plan Savings. Referring to our original example, if the child had a made a traditional IRA contribution of $7,000 the taxable income and the tax would zero. So, it might be appropriate to make a Roth IRA contribution instead, especially since the child has so many years before retirement and the future tax-free retirement benefits will far outweigh the current $100 savings. Of course, some children will not be thinking about retirement at their young age and may object to contributing to an IRA. If that is the case, perhaps you as the parent, or even the grandparents, can make a gift of the IRA contribution, which can grow to big bucks by the time the child reaches retirement age.
Benefits of Summer Jobs for Kids
- Skill Development: Summer jobs help children develop essential skills such as communication, teamwork, and problem-solving.
- Financial Literacy: Earning money teaches kids about budgeting, saving, and financial responsibility from a young age.
- Work Ethic: Holding a job instills a strong work ethic and the value of hard work.
- Independence and Confidence: Working outside the home encourages independence and boosts confidence.
- Tax Implications Introduced: A summer job may be the first time that a working child or young adult becomes aware of the tax system.
In conclusion, summer jobs provide a wealth of opportunities for kids to learn, grow, and earn. By exploring different options, they can find a job that suits their interests and skills, paving the way for future success.
If you have questions related to your child’s employment or hiring your child in your business, please give this office a call.
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