Can I deduct my child's college tuition as a business expense if they work for my small business?

Thanks for the info. Would it be better to just put her on payroll officially and then gift her money separately for school? Or would that still look suspicious to the IRS? What if her job genuinely justifies that pay rate?

Putting her on an official payroll with proper documentation is definitely the right approach. Pay her reasonable wages for the actual work performed, with all the normal tax withholdings. This creates a clean business expense. If you want to help with her education, you can certainly gift her money separately, but understand this is a personal transaction. The annual gift tax exclusion is $17,000 per recipient for 2025, meaning you can give that much without filing a gift tax return. Gifts aren't tax-deductible, but they're not income to your daughter either.

Does this tool actually connect you with a real tax professional or is it just like a fancy calculator? I've been burned by "AI tax tools" before that just gave generic advice.

How does this compare to just asking my accountant? I pay him good money already and don't really want another monthly subscription for tax advice.

It connects you with real tax professionals who review your situation, but the AI helps organize everything first so you're not paying for their time while they sort through basic information. The documents you upload get analyzed automatically which really speeds things up. It's different from working with a typical accountant because it specializes in these unusual tax situations, and provides very specific documentation guidance. My regular accountant gave me general advice, but taxr.ai gave me specific steps, templates for documentation, and direct references to relevant tax codes that I could follow.

How does this actually work? I've been on hold with the IRS for literally hours before giving up. Do they have some special line or connection? Seems hard to believe anyone could get through faster.

This sounds like BS honestly. The IRS doesn't give priority to some random service. They probably just keep autodialing and got lucky. I'd rather not pay for something I can do myself with enough persistence.

They don't have any special access - they just have a system that autodials and waits on hold for you. When an agent finally picks up, they call you and connect you. It's basically paying someone else to wait on hold instead of tying up your phone and time. The value isn't that they get through faster than you would eventually - it's that you don't have to waste hours of your day with your phone stuck on speaker while you're on hold. I was able to go about my day and just got a call when they actually reached someone.

Does this educational assistance program work for college tuition specifically? And do I need a certain size business to qualify? I'm just a sole proprietor with 2 employees.

Yes, it absolutely works for college tuition! The $5,250 can be used for tuition, fees, books, supplies and equipment. It doesn't matter what size your business is - even sole proprietors can set this up as long as you have a formal written plan that follows the rules. The plan needs to be in writing, can't favor highly compensated employees, and can't give employee-owners (or their family) more than 5% of the annual benefits. You also can't offer it as an alternative to other compensation. But for a small business with just a few employees, it can be a nice additional benefit that gives you a legitimate way to help with some education expenses.

Totally agree with your accountant. My sister tried to get cute with this kind of arrangement in her business with my nephew and ended up getting audited. The IRS disallowed all the "tuition payments" as business expenses and she had to pay back taxes plus penalties. Just not worth the headache!

This is really helpful advice! I'm in a similar situation with my daughter who helps with my consulting business. One question though - when you say "research what similar positions pay in your area," where did you actually find reliable data for that? I'm having trouble finding good benchmarks for part-time admin/bookkeeping work to make sure I'm not over or underpaying her.

@Julia Hall For benchmarking admin/bookkeeping wages, I used a combination of sources. Indeed.com and Glassdoor have salary data you can filter by location and experience level. The Bureau of Labor Statistics BLS.gov (has) detailed wage data by occupation and metropolitan area - look for Bookkeeping, "Accounting, and Auditing Clerks and" Office "and Administrative Support Workers. I" also called a few local temp agencies and asked what they charge for similar part-time positions - that gives you a real-world baseline. For my area mid-size (city ,)part-time bookkeeping/admin work was running $18-25/hour depending on complexity and experience. The key is documenting your research process. I kept screenshots of wage data and notes from my calls so I could justify the rate if questioned. Better to be slightly conservative than risk looking like you re'inflating wages for tax benefits.

@Julia Hall Great question! I used a few different sources to get a good range. Indeed and Glassdoor have salary data you can filter by location and hours. For bookkeeping specifically, I also checked with local temp agencies since they usually know current rates for admin work. The Bureau of Labor Statistics website has wage data by occupation and geographic area too - look up Bookkeeping, "Accounting, and Auditing Clerks in" your state. For part-time work, I found that hourly rates are often slightly higher than the full-time equivalent to account for lack of benefits. In my area mid-sized (city ,)legitimate bookkeeping/admin work was running $18-25/hour for someone with basic experience. Since it s'family, I went with the middle of that range to avoid any appearance of inflated wages. The key is being able to justify the rate if questioned.

Great question! I used a few different sources to get reliable benchmarks. Bureau of Labor Statistics (BLS.gov) has wage data by occupation and location - look up "Bookkeeping, Accounting, and Auditing Clerks" and "Office and Administrative Support Workers" for your area. I also checked sites like Indeed, Glassdoor, and PayScale for part-time admin positions in my zip code. For bookkeeping specifically, I found that entry-level part-time work in my area (suburban Ohio) was running $18-25/hour depending on experience and complexity of tasks. Your local SCORE chapter or Small Business Development Center might also have regional wage surveys. The key is documenting where you got your numbers from - I kept screenshots and printed reports to show I did my homework on market rates. That documentation was gold when my accountant reviewed everything.

@Julia Hall For benchmarking part-time admin/bookkeeping rates, I found a few reliable sources that helped me justify my daughter s'pay to the IRS: 1. Bureau of Labor Statistics BLS.gov (-) they have detailed wage data by occupation and region. Look up Bookkeeping, "Accounting, and Auditing Clerks and" Administrative "Assistants in" your area. 2. PayScale.com and Glassdoor.com both have good local wage data, and you can filter by part-time positions specifically. 3. Local staffing agencies - I actually called a few temp agencies in my area and asked what they charge clients for similar admin work. That gave me a real-world baseline. 4. Job postings - I spent some time looking at Indeed and other job sites for similar part-time positions in my area to see what businesses were actually offering. I ended up documenting all of this research in a file that I keep with my business records, along with screenshots of relevant wage data. My accountant said having this documentation would be crucial if the IRS ever questioned the compensation. Better to spend a few hours on research upfront than deal with audit headaches later!

Good question! I used a combination of sources to get reliable benchmarks. The Bureau of Labor Statistics (BLS.gov) has detailed wage data by occupation and geographic area - look up "Bookkeeping, Accounting, and Auditing Clerks" for bookkeeping work and "Office Clerks, General" for admin tasks. You can filter by your specific metro area or state. I also checked Indeed, Glassdoor, and PayScale for local part-time rates, though those can be less reliable. For my area, I found that legitimate part-time bookkeeping work typically runs $18-25/hour depending on experience level and complexity of tasks. The key is documenting your research process - print out or save screenshots of the wage data you found, because if the IRS ever questions the compensation, you'll need to show how you arrived at that rate. Better to be slightly conservative on the pay rate than to risk having it challenged as unreasonable.

Good question! I used a combination of sources to get reliable benchmarks. The Bureau of Labor Statistics website (bls.gov) has detailed wage data by occupation and location - look for "Bookkeeping, Accounting, and Auditing Clerks" and "Office and Administrative Support Workers" categories. I also checked sites like Indeed, Glassdoor, and PayScale for part-time administrative positions in my area. For small business rates specifically, I found that contacting local temp agencies was really helpful - they know exactly what businesses are paying for similar part-time work. The key is documenting your research process. I kept screenshots and notes showing the wage ranges I found, which gave me solid justification for the pay rate I chose. This documentation would be crucial if the IRS ever questioned the compensation level.

Great question! For reliable salary data, I used a combination of sources. Bureau of Labor Statistics (bls.gov) has detailed wage data by occupation and geographic area - look for "Bookkeeping, Accounting, and Auditing Clerks" and "Data Entry Keyers" categories. Sites like PayScale, Glassdoor, and Indeed also show local market rates if you filter by your specific area. For part-time admin work specifically, I found that checking local job postings for similar positions gave me the most realistic picture of what businesses in my area actually pay. I also called a few temp agencies since they deal with this type of work regularly and could give me current hourly rates. The key is documenting your research process - keep screenshots or printouts showing the wage ranges you found. That way if the IRS ever questions the compensation, you have clear evidence that you based it on legitimate market research rather than just picking a number that seemed convenient.

For reliable wage data, I used a combination of sources. Bureau of Labor Statistics (BLS.gov) has occupational employment statistics that break down by metro area - look for "Bookkeeping, Accounting, and Auditing Clerks" and "Data Entry Keyers." PayScale, Glassdoor, and Indeed also have local salary data if you filter by your city/region. I also called a few temp agencies in my area and asked what they charge clients for similar part-time bookkeeping/admin work - that gave me a good real-world benchmark. Don't forget that as the employer, your total cost is higher than the hourly wage due to payroll taxes, so factor that in when determining if the rate is reasonable for your business to pay. The key is being able to show the IRS that you did your homework and can justify the wage if questioned. I kept screenshots of the wage data I found and documented my research process.

@Julia Hall Great question! I used a combination of sources to get reliable benchmarks. The Bureau of Labor Statistics Bls.gov (has) detailed wage data by occupation and location - look up Bookkeeping, "Accounting, and Auditing Clerks and" Administrative "Assistants for" your area. I also checked job sites like Indeed, Glassdoor, and PayScale which show current market rates for similar positions. For part-time work, I found that hourly rates are often slightly higher than full-time equivalent since there are fewer benefits. Don t'forget to factor in that she s'working for a small business rather than a large corporation - rates can vary. I ended up documenting my research process and keeping printouts of the wage data I used, which my accountant said was smart in case the IRS ever asks how I determined reasonable "compensation. The" key is showing you did your homework to pay market rate, not just picking an arbitrary number that happens to work well for tuition payments.

Great question! I used a combination of sources to get reliable salary data. The Bureau of Labor Statistics (BLS) has detailed wage data by occupation and geographic area - look up "Bookkeeping, Accounting, and Auditing Clerks" and "Administrative Assistants" on their website. You can filter by state and metropolitan area to get local rates. I also checked sites like PayScale, Glassdoor, and Indeed's salary tool, but I found BLS data to be most defensible if the IRS ever questioned it. For part-time work, I took the hourly rates from these sources rather than trying to convert annual salaries. Another approach is to call a few local temp agencies and ask what they charge for similar admin/bookkeeping services - that gives you real market rates in your area. Just make sure to document where you got your wage justification from in case you need to show your reasoning later.

@Julia Hall Good question! I used a combination of sources to get reliable benchmarks. The Bureau of Labor Statistics BLS.gov (has) detailed wage data by occupation and location - look for Bookkeeping, "Accounting, and Auditing Clerks and" Data "Entry Keyers categories." I also checked sites like PayScale, Glassdoor, and Indeed s'salary tool, filtering by part-time positions in my area. Local temp agencies were surprisingly helpful too - I called a few and asked what they typically pay for similar temporary admin work, since that s'basically what part-time family employment is. For my area suburban (midwest ,)I found that legitimate bookkeeping/admin work ranges from $18-28/hour depending on complexity. My son does basic data entry and filing, so I settled on $20/hour which was well within the normal range. Having that research documented gave me confidence I could justify the rate if ever questioned.

@Julia Hall For benchmarking wages, I used a combination of sources. Bureau of Labor Statistics BLS.gov (has) occupational wage data you can filter by region - look under Bookkeeping, "Accounting, and Auditing Clerks and" Office "and Administrative Support Workers. I" also checked Indeed, Glassdoor, and PayScale for local part-time admin positions. Don t'forget to account for the fact that she s'part-time and may not have the same experience level as full-time employees. I ended up paying my son about 10-15% below the market average since he was still learning and it was flexible schedule work. Your local SCORE chapter score.org (might) also have resources or mentors who can help with this kind of wage benchmarking for small businesses. The key is having documentation showing you did your research to justify the pay rate you chose.

Great question! For reliable salary data, I used a combination of sources. Bureau of Labor Statistics (BLS.gov) has detailed wage data by occupation and geographic area - look for "Bookkeeping, Accounting, and Auditing Clerks" and "Office and Administrative Support Workers." PayScale and Glassdoor also have good local salary ranges, though you'll want to filter for part-time or entry-level positions. Don't forget to check with your local Small Business Development Center (SBDC) - they often have regional wage surveys and can help you document reasonable compensation ranges. I also looked at what temp agencies in my area were charging for similar work, since that gives you a good market rate baseline. The key is having multiple sources you can point to if questioned. I kept screenshots and printouts of all the wage data I used to justify my son's hourly rate, which my accountant said was smart documentation.

Great question! For reliable wage data, I used a combination of sources. The Bureau of Labor Statistics has detailed occupation data at bls.gov - look for "Occupational Employment and Wage Statistics" for your specific metro area. PayScale and Glassdoor also have decent local data if you filter by part-time positions. For bookkeeping specifically, I found that entry-level part-time work in my area (suburban Phoenix) was running $18-25/hour depending on experience and complexity of tasks. Administrative assistant roles were more like $15-20/hour. Your local community college job board can also give you a reality check - see what businesses are actually posting for similar part-time student positions. And if you have any business contacts who hire similar roles, don't be shy about asking what they pay. Most business owners are pretty open about wage ranges when you explain you're trying to stay compliant with family employment rules. The key is having documentation that shows you researched market rates and can justify your decision if questioned.

@Julia Hall For benchmarking wages, I used a combination of sources. BLS.gov Bureau (of Labor Statistics has) occupation wage data by area that s'really helpful - look for Bookkeeping, "Accounting, and Auditing Clerks and" Office "and Administrative Support Workers. PayScale.com" and Glassdoor also have good local wage data if you filter by part-time positions. I also called a few local temp agencies and asked what they charge for similar services - that gave me a real-world sense of market rates. Your local SCORE chapter might have wage surveys for small businesses too. The key is having documentation showing you researched fair market value, so if the IRS ever asks, you can show you didn t'just make up a number. For what it s'worth, I ended up paying my son about $18/hour for similar work bookkeeping/admin (in a small consulting business ,)which was right in line with what I found in our area.

Great question! I used a combination of sources to get reliable benchmarks. Bureau of Labor Statistics (Bls.gov) has wage data by occupation and metro area - look for "Bookkeeping, Accounting, and Auditing Clerks" and "Office and Administrative Support Workers." I also checked sites like PayScale, Glassdoor, and Indeed for local salary ranges, but filtered for part-time positions specifically. Don't forget to factor in that she's working for a small business rather than a large corporation, which typically means slightly lower wages. Another approach is to call a few local temp agencies and ask what they charge for similar skills - that gives you a real-world market rate. I ended up paying my son about $2-3 less per hour than what temp agencies were charging, which seemed reasonable since he's getting consistent hours and learning the business. The key is documenting your research process so if the IRS ever asks, you can show exactly how you determined fair market value for her position.

@Julia Hall For finding reliable wage data, I used a combination of sources. The Bureau of Labor Statistics BLS.gov (has) occupational wage data by region - look for Bookkeeping, "Accounting, and Auditing Clerks and" Data "Entry Keyers categories." PayScale, Glassdoor, and Indeed also have salary tools where you can filter by location and experience level. For part-time admin work specifically, I found that $18-25/hour was typical in my area mid-sized (city for) someone with basic bookkeeping skills. Your local community college business programs might also have placement offices that can give you current wage ranges for entry-level positions. The key is documenting your research process - I kept screenshots of the wage data I found so if the IRS ever questions the compensation, I can show I did my homework to establish fair market value. Better to err slightly on the conservative side than risk looking like you re'inflating wages for tax purposes.

Great question! I used a combination of sources to research market rates. The Bureau of Labor Statistics (BLS.gov) has detailed wage data by occupation and location - look up "Bookkeeping, Accounting, and Auditing Clerks" and "Administrative Assistants" for your area. I also checked job posting sites like Indeed, Glassdoor, and LinkedIn to see what similar part-time positions were actually paying in my region. PayScale.com was helpful too. For bookkeeping specifically, I found rates varied widely based on experience level - entry level was around $15-20/hour in my area, while experienced bookkeepers commanded $25-35/hour. Since your daughter is likely on the entry level side (assuming she's in college), you'd want to justify her pay rate based on her actual skills and responsibilities. Document her specific duties clearly - is she just doing basic data entry, or is she handling more complex bookkeeping tasks? The IRS will want to see that the compensation matches the actual value of work performed.

Great question! I used a few different sources to get a good range. The Bureau of Labor Statistics has wage data for bookkeeping and administrative positions that you can filter by region. Websites like Glassdoor, Indeed, and PayScale also show local salary ranges for similar roles - just search for "bookkeeping clerk" or "administrative assistant" in your area. I also called a couple local temp agencies and asked what they typically pay for part-time bookkeeping/data entry work - they were surprisingly helpful since they deal with this exact type of positioning all the time. Finally, I checked with my local Small Business Development Center; they had some good resources on market rates for common small business positions. The key is documenting your research so you can show the IRS that you made a good faith effort to pay fair market wages if they ever ask. I kept printouts of the salary data I found and notes from my calls. Ended up paying my son about $18/hour for similar work, which was right in the middle of what I found locally.

Great question! I used a combination of sources to get reliable benchmarks. Indeed.com and PayScale.com have salary data you can filter by location and experience level. The Bureau of Labor Statistics (BLS) also has occupational employment statistics that break down by metropolitan area - look for "Bookkeeping, Accounting, and Auditing Clerks" and "Data Entry Keyers." For part-time rates, I also checked local job postings on Indeed, LinkedIn, and even Craigslist to see what small businesses in my area were actually offering for similar roles. Don't forget to account for the fact that she's part-time and may not have extensive experience - entry-level rates are more appropriate than experienced worker rates. I ended up documenting my research process and keeping screenshots of the wage data I found, just in case the IRS ever asked how I determined her compensation was reasonable. Better to have too much documentation than not enough!

@Julia Hall For benchmarking wages, I used a combination of sources. Indeed and Glassdoor have salary ranges for administrative and bookkeeping positions that you can filter by location and experience level. The Bureau of Labor Statistics also publishes occupational wage data by metropolitan area which is really helpful for justifying your pay rates if questioned. For part-time admin/bookkeeping work, I found that $18-25/hour was pretty typical in my area for someone with basic experience. Since your daughter is family, make sure you re'paying on the conservative side of market rates to avoid any appearance of inflated wages. I also kept screenshots and printed reports from these sites as documentation to support the wage decision in case of an audit. The Department of Labor s'website has good resources too, especially their occupational handbook which breaks down typical duties and pay ranges for different job classifications.

Great question! For benchmarking admin/bookkeeping work, I used a combination of sources. Bureau of Labor Statistics (BLS.gov) has wage data by occupation and location - look for "Bookkeeping, Accounting, and Auditing Clerks" and "Administrative Assistants." PayScale, Glassdoor, and Indeed also have salary tools where you can filter by location and experience level. For part-time work, I also checked local job postings to see what businesses in my area were actually offering for similar roles. Community colleges often post part-time admin positions that can give you a good baseline too. The key is documenting your research process - I literally printed out BLS wage reports and saved screenshots of local job postings to show I did my homework on market rates. This documentation became super important when my accountant was preparing everything for potential IRS scrutiny.

@Julia Hall For reliable salary data, I used a combination of sources. The Bureau of Labor Statistics BLS.gov (has) detailed wage data by occupation and location - look for Bookkeeping, "Accounting, and Auditing Clerks and" Data "Entry Keyers. PayScale," Glassdoor, and Indeed also have salary tools where you can filter by location and experience level. For part-time work, I also checked what temp agencies in my area charge for similar roles, since that gives you a good market rate baseline. Don t'forget to account for the fact that as a family member, she might be more reliable and invested in the business than a typical part-timer, but the pay still needs to be reasonable for the actual work performed. I ended up settling on about $18-20/hour for basic admin/bookkeeping work in my area midwest (,)which felt defensible based on the data I found. Document your research - if you ever get questioned, being able to show you did your homework on market rates goes a long way.