Kids are legally allowed to be hired as employees by their parents when they are 7 years old, provided that the work assigned to them is not mentally and physically challenging, and is within their means to achieve it. The number of hours and the type of assignments completed by the child should be recorded on an Excel Sheet. As long as the pay and the work given to the child are reasonable, you can avail of the tax deduction.
The wages given to your kids do not go into their piggybanks, but into your bank. The money can, and will, be spent only with your approval on the necessary clothes, education, toys, and so on.
Finally, the most important record to keep is to make sure that your kids do not pay for more than 49% of their expenses. Their total expenditure thus needs to be tracked at all times, because if they cross the 50% mark, then you end up losing them as an itemized deduction on your personal return.
Keywords: Tax Deductions, Tax Savings, Tax Planning