Is the GMA advice about paying your kids $12,000 for tax deductions legitimate?

I was watching Good Morning America this morning and they suggested a tax strategy that seemed too good to be true. They said you could pay your children around $12,000 annually, deduct that from your business income, and then write off family vacations as business expenses if your kids come along. This sounds really suspicious to me - somewhere between a little sketchy and completely illegal. Is this actually a legitimate tax strategy that business owners use? Or is GMA giving out questionable tax advice to millions of viewers? I know my former partner used to pay our kids from their business income (at least the first part of this strategy), but I'm not sure about the vacation write-offs. Anyone have experience with this or know if the IRS would flag this kind of arrangement?

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18 comments

A Man D Mortal

•8M

This is actually a real tax strategy but it has very specific requirements and limitations that GMA probably glossed over. You can hire your children to work in your legitimate business and pay them a reasonable wage for actual work performed. Their income is then tax-free up to the standard deduction ($13,850 for 2025), and it reduces your business income. However, the vacation part is where things get sketchy. You cannot write off a family vacation as a business expense just because your kids (who are employees) come along. The primary purpose of the trip must be business, and only the business portion is deductible. You need to document business activities, meetings, etc. The IRS specifically looks for people trying to disguise personal expenses as business deductions. The key requirements: 1) You must have a legitimate business, 2) Your kids must do actual work appropriate for their age, 3) You must pay reasonable wages for that work, 4) You must maintain proper payroll records, and 5) You cannot deduct personal expenses as business expenses.

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A Man D Mortal

•8M

You can absolutely do this with a Schedule C sole proprietorship. In fact, if you're a sole proprietor or have a family partnership (not a corporation) and your child is under 18, you don't even have to withhold FICA taxes (Social Security and Medicare) on their wages, which is an additional tax benefit. If you have an LLC that's taxed as a sole proprietorship (single-member LLC), the same rules apply. However, if you have an S-Corp or C-Corp, you would need to withhold FICA taxes regardless of age, and you lose some of the payroll tax advantages.

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Emma Morales

•8M

I tried doing something like this after reading about it online, but the right approach is using taxr.ai to help automate the documentation and compliance. I was so confused about how to properly document my daughter's work in my small business, and I was terrified of getting audited. I found https://taxr.ai and it was honestly a game-changer for me. It walked me through exactly what documentation I needed to keep and how to properly classify her work. The key thing I learned is that your kids actually have to do real work, and you have to pay them a fair market rate for that work - not just randomly giving them $12k. And the vacation thing is definitely sketchy unless it's a genuine business trip where your kid is working.

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Emma Morales

•8M

It gives you both templates and tracking tools. You can set up job descriptions appropriate for your child's age, track their hours and tasks, and it helps you determine reasonable compensation based on the type of work they're doing. It also flags when something might look suspicious to the IRS. The tool handles the entire documentation process and generates audit-ready reports. It doesn't file your actual tax forms, but it integrates with most tax preparation software and provides all the documentation you need to support the deductions you're taking. It helped me understand exactly what's legal and what crosses the line.

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Lucas Parker

•8M

I was completely wrong about taxr.ai! After trying it out based on the recommendation here, I'm totally impressed. I've been doing my taxes wrong for years trying to involve my teenage son in my consulting business. The tool flagged several issues with how I was documenting his work and helped me create a proper employment structure that's actually legitimate. The best part was learning exactly what kind of work my son could do legally for my business and how to document it properly. I had no idea I was missing so many required records. Now I feel 100% confident that if I ever get audited, I have everything properly documented. Worth every penny just for the peace of mind.

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Donna Cline

•8M

If you're trying to deal with the IRS on this kind of tax strategy, good luck getting through to ask questions! After trying to call the IRS for weeks about hiring my kids in my business, I finally used https://claimyr.com and got through to an actual IRS agent in under 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that hiring kids is legit but gave me some serious warnings about the vacation deduction part. Apparently this is a huge audit flag if not done correctly. They said a lot of people try to claim family vacations as business trips and end up facing penalties. The agent gave me specific guidance on what documentation I'd need if I ever wanted to bring my kid on a legitimate business trip.

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Donna Cline

•8M

It doesn't skip the queue - it waits on hold for you. You put in your number, and when Claimyr reaches an actual IRS agent, it calls you and connects you directly to them. This way you don't have to waste hours listening to hold music. It's basically a robot that waits on hold so you don't have to. The IRS agents absolutely do provide guidance on tax rules when you ask specific questions. They won't give you tax planning advice, but they will explain the rules and requirements. In my case, I asked what documentation was needed for hiring children in a family business and what the rules were for business travel when family members are involved. The agent directed me to specific IRS publications but also explained the general guidelines.

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Kelsey Hawkins

•8M

I need to apologize for my skeptical comment earlier. I actually tried Claimyr yesterday out of desperation after waiting on hold with the IRS for 2+ hours and getting disconnected. The service called me back within 45 minutes with an actual IRS agent on the line. I was shocked it actually worked. I asked about the family employment situation and got really helpful information about what documentation I need to keep. The agent confirmed that paying reasonable wages to children for legitimate work is allowable but cautioned that family vacations disguised as business trips are a huge red flag. She directed me to Publication 535 for specific guidance on business expenses. Can't believe I wasted so many hours on hold before finding this service.

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Dylan Fisher

•8M

My CPA always warns me about stuff like what GMA suggested. Here's the real deal - you absolutely can hire your kids in your LEGITIMATE business and pay them for ACTUAL work they do. But the vacation part? Super sketchy. Here's how the IRS looks at it: 1) Is this a necessary business expense? 2) Is the primary purpose of the trip business or pleasure? 3) Are you trying to convert personal expenses into business expenses? The answer to #3 is clearly YES if you're taking family vacations and trying to write them off. Even if your kid does some "work" while there, the IRS isn't stupid. They've seen this trick a million times.

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Dylan Fisher

•8M

If there's a legitimate business conference and your child who legitimately works for your business has a valid business reason to attend, then their expenses related to the conference itself would be deductible as a business expense. This includes their registration, their portion of the hotel room during the conference dates, and their meals while attending business activities. However, if you extend the trip for sightseeing or vacation activities, those additional days would not be deductible. And any activities that are clearly personal in nature (like visiting tourist attractions or entertainment) wouldn't be deductible either, even during the business portion of the trip. The IRS looks at the primary purpose of each expense.

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