Anomaly Angle #5: Hire Your Kids? Trump Accounts & Family Tax Strategies

Hiring your kids is one of the most talked about strategies on social media and one of the most often done wrong. Greg O'Brien and John Malone separate what actually works from the clickbait, then move on to Section 530A accounts, better known as Trump accounts, which are new for 2026.

Yes, you can hire your child

There is nothing stopping a business owner from putting a child on payroll. State law governs the employment of minors and varies, though most states carve out family employment. Check with an employment attorney for your state rather than assuming.

Where people get it wrong

The social media version is "hire your child and pay them the standard deduction." That is the first red flag. Employing a family member invites extra scrutiny, and the wage has to be what a third party would be paid for the same work. A six year old is not earning 50,000 dollars in an accounting firm. A younger child doing office work, sweeping, copying, filing, at 8 to 12 dollars an hour depending on where you live, is entirely defensible.

Benchmark the rate before you set it. Job boards and public data on clerical and manual work give you a comparison, and it is worth keeping that evidence on file.

The second red flag is timing. Pay has to be periodic and systematic, on the same schedule as everyone else on your payroll. Clients arrive having paid the whole year's wage in one lump on 31 December. No employee is paid that way.

How young is too young

Federal law gives no bright line. Nothing in the code names an age. Tax court cases have accepted children as young as seven, which does not make seven a rule, nor does it settle anything below that.

Below that age, the work has to genuinely fit the business. Content creators, coaching businesses built around family, anything in the world of child products: hiring young children for images or social media is the modern version of child modelling, which has been normal for decades. An architecture practice or an accounting firm doing the same thing is not credible. The younger the child, the narrower the set of businesses where it holds up.

Setting it up properly

• Put them on payroll, do not issue a 1099. A 1099 over 600 dollars means they file a return.
• Entity matters. In a single member LLC, wages to a child under 18 are exempt from FICA. In an S corp they are not, which mutes the benefit slightly, usually by a few hundred dollars.
• Pay on the same cycle as your other employees.
• Watch state tax. Wages under the federal standard deduction, around 15,000 dollars, mean no federal income tax, but not every state has an equivalent, so a small state filing may still be due.
• Keep timesheets, a duty list and something resembling an employment agreement with the pay rate. This is the audit defence.

Why it works

A business owner at a 32 percent effective rate who pays three children a total of 45,000 dollars moves that income to people who pay roughly zero, and takes the deduction. The money largely stays in the family either way.

The arbitrage gets better with a custodial Roth. Earned income is the requirement for any IRA contribution, and children with only dividends or interest do not qualify. Wages solve that. So the child earns money, pays no tax on it, contributes up to 7,000 dollars into a custodial Roth, and it grows tax free from there. Deduction for the parent, no tax for the child, tax free growth: a triple benefit that does not exist anywhere else.

Mechanically the money moves from the business into an account in the child's name, usually a custodial or joint bank account, and the Roth contribution is made from there.

Trump accounts, Section 530A

New under the One Big Beautiful Bill Act. Any child under 18 can have one, not just newborns. Accounts can be opened in advance, with funding from 6 July 2026.

• Children born between 2025 and 31 December 2028 receive a 1,000 dollar seed contribution from the government, with no strings attached.
• Contributions are capped at 5,000 dollars a year in aggregate across everyone: parents, grandparents, friends, a church or non profit.
• An employer can contribute up to 2,500 dollars of that. The business deducts it as compensation and a special exclusion keeps it out of the employee's taxable income, so it lands in the child's account tax free.

These are their own animal. Personal contributions are not deductible, and the money goes in pre tax rather than post tax, growing tax deferred until 18. At that point the usual move is a rollover, likely into a Roth.

Two more points. There is no earned income requirement, which makes this the one route to a retirement style account for families without a business. And unlike a 529, the money is not tied to college: at worst it becomes a retirement account for the child. Investments are restricted to low cost index funds, and business owners offering it as a benefit need to check the discrimination rules first.