Can an LLC hire children for marketing and make college tuition a business expense?

This is an interesting question but there are several separate tax issues to consider here. First, yes, you can hire your children in your business (LLC or otherwise) as long as the work is legitimate, necessary for the business, and the compensation is reasonable for the work performed. They need to be doing actual work at market rates - not just collecting a paycheck. For the American Opportunity Tax Credit, your children would need to be independent taxpayers not claimed as your dependents. This is a big trade-off since you'd lose your dependency exemption for them. Here's the problematic part - paying for college tuition directly as a business expense almost certainly won't work. The IRS would view this as a personal expense disguised as a business one. Education expenses can only be deducted if they maintain or improve skills needed in your CURRENT business - not general education for future careers. What you're describing sounds like trying to convert personal expenses (college tuition) into business deductions, which is likely to trigger IRS scrutiny.

I went through something similar last year with my consulting business and my daughter's college expenses. What saved me was using taxr.ai (https://taxr.ai) to analyze my situation. They reviewed my business structure and transactions to identify legitimate tax strategies I hadn't considered. Instead of trying to deduct tuition directly, which raised red flags when I tried it, they showed me how to properly compensate my daughter for actual marketing work (social media management, content creation, etc.) at market rates. This provided her income while keeping everything legitimate. They also identified several business deductions I was missing that helped offset some costs. What I appreciated was that they specifically warned me about schemes that would trigger IRS scrutiny - like trying to directly deduct family education expenses through a business.

Just wanted to follow up about my experience with taxr.ai after seeing it mentioned here. I was skeptical about sharing my tax information online, but I'm really glad I did. They identified that what I was planning with my LLC and daughter's tuition would have likely triggered an audit flag. Instead, they helped me structure legitimate compensation for my daughter's actual work contributions to my business. They also showed me how to properly document her work hours and contributions to withstand potential scrutiny. The service paid for itself by identifying several legitimate business deductions I was missing completely. Definitely worth checking out if you're in a similar situation with college expenses and a family business.

Another option that saved me during this exact situation was using Claimyr (https://claimyr.com) to get direct access to an IRS agent. I was trying to figure out the right way to handle my son's work in my business and his college expenses. After waiting on hold with the IRS for hours over multiple days, I was ready to give up. Then I found Claimyr through a friend. Their service had me talking to an actual IRS representative in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent walked me through what's allowed and what's not when hiring family members in a business. She specifically warned me about trying to deduct tuition directly as a business expense (big no-no!) but gave me guidance on legitimate ways to compensate family members for actual work.

Wanted to follow up here. I was the skeptic about Claimyr in the thread above, but I decided to try it when I couldn't get through to the IRS about a similar situation with my LLC and my son's work/education situation. I'm genuinely surprised - it worked exactly as promised. I got connected to an IRS agent in about 15 minutes who explained that while I couldn't deduct my son's tuition as a business expense directly, there were legitimate ways to employ him. The agent directed me to specific IRS publications about family employment in businesses that cleared up my questions. Having definitive answers directly from the IRS gave me confidence to move forward with properly employing my son while avoiding anything that would trigger audit flags. Saved me from making a potentially costly mistake.

Another option nobody has mentioned is looking into a QSEHRA (Qualified Small Employer Health Reimbursement Arrangement) if your LLC has no full-time employees other than you (and spouse if applicable). While this won't help with tuition directly, it can reimburse health insurance premiums tax-free for your kids if they're working for your business and have their own health insurance. This frees up other money for tuition. We use this in our family business and it's been helpful for our daughter who works about 15 hours a week for us while in college.

Has anyone considered a 529 plan instead of trying to make tuition a business expense? We've been putting money into 529s for years, and while it doesn't make tuition tax-deductible federally, many states offer state tax deductions for contributions.

I've been through this exact scenario with my family business and learned some hard lessons. The bottom line is that directly paying tuition as a business expense is almost certainly going to be disallowed by the IRS - it's considered a personal expense regardless of how you structure it. However, there are legitimate approaches that can help. You absolutely can hire your children for real marketing work at reasonable market rates. The key is documentation - keep detailed records of hours worked, specific tasks completed, and ensure the compensation matches what you'd pay a non-family member for the same work. One strategy that worked for us was having our daughter handle all our social media management, content creation, and basic graphic design work. We paid her $20/hour for about 15 hours per week during the school year and more during summer breaks. This gave her legitimate income while providing real value to the business. For the American Opportunity Tax Credit angle, remember that if you claim your children as dependents, they can't claim the credit themselves. You'd need to weigh the value of the dependency exemption against potentially letting them claim the education credit on their own returns. I'd strongly recommend consulting with a tax professional before implementing any strategy. The IRS scrutinizes family employment arrangements closely, especially when significant education expenses are involved.

This is a great discussion with lots of practical advice! As someone who's been navigating similar challenges with my small business and two kids in college, I wanted to add a few thoughts based on my experience. The consensus here is absolutely correct - you cannot directly deduct tuition as a business expense, no matter how you structure it. I learned this the hard way when my accountant flagged a similar plan I was considering. What has worked for me is creating a legitimate part-time employment arrangement for my daughter who handles our digital marketing. The key lessons I've learned: 1. **Start with genuine business needs** - Don't create work just to justify payments. My daughter was already helping informally with our Instagram and Facebook presence, so formalizing this made sense. 2. **Pay market rates, not inflated wages** - I researched what local marketing assistants earn and stay within that range. Overpaying family members is a red flag. 3. **Document everything obsessively** - Weekly timesheets, project deliverables, performance metrics. Treat it like you would any other employee relationship. 4. **Consider the dependency trade-off carefully** - We decided to continue claiming her as a dependent since the value of that deduction plus her earned income working for us was better than letting her claim the American Opportunity Credit independently. The $56k annual tuition you mentioned is substantial, so even legitimate employment income will only offset a portion. But every bit helps, and doing it the right way protects you from audit issues down the road. Have you identified specific marketing tasks your kids could realistically handle for your consulting business?