How much can I pay my child tax-free in 2026?
Quick Answer
In 2026, a child whose only income is wages owes $0 federal income tax on earnings up to $16,100. A dependent's standard deduction is generally earned income plus $450, with a $1,350 minimum, capped at $16,100. Other income, state tax, and withholding can change the result. A parent's sole proprietorship or a parents-only partnership may also qualify for family-employment payroll-tax exceptions when every requirement is met.
The Details
Here's how the tax-free threshold works:
Federal Income Tax: Dependent Standard-Deduction Rules
The maximum standard deduction for a single filer in 2026 is $16,100. For a person who can be claimed as a dependent, the amount generally equals earned income plus $450, subject to a $1,350 minimum and the $16,100 maximum. If wages are the child's only income, federal taxable income may be zero up to that maximum. Other income and filing circumstances matter.
Earnings above the applicable deduction can create taxable income. Do not assume the tax rate or filing result without considering the child's complete return.
FICA Taxes: Additional 15.3% Savings
If a child under 18 is employed by a parent sole proprietor, a disregarded single-member LLC wholly owned by the parent, or a partnership in which every partner is a parent, Social Security and Medicare exceptions may apply. FUTA has a separate under-21 rule. Corporations and LLCs taxed as corporations generally do not qualify. Confirm ownership and federal tax classification before relying on a 15.3% estimate.
| Business Type | FICA Exempt? |
|---|---|
| Sole Proprietorship | May qualify |
| Single-Member LLC (disregarded and parent-owned) | May qualify |
| Partnership (both parents) | May qualify |
| S-Corporation | No |
| C-Corporation | No |
| Household (non-business) | Child under 21: wages generally not counted for federal household employment taxes |
State Taxes May Apply
State income, wage, unemployment, workers' compensation, and child-labor rules can differ from federal rules. When state and federal youth-employment protections differ, the more protective applicable rule controls. Check the current state labor and tax-agency requirements before work begins.
What This Means for You
If you pay your child for legitimate work in 2026, possible outcomes include:
- Federal income tax: Wages may be fully offset by the child's applicable standard deduction
- Payroll tax: A qualifying family-employment arrangement could avoid up to $2,463 in combined FICA at this wage level
- Business deduction: Reasonable wages for genuine business services may be deductible
- Roth IRA: The contribution limit is the lesser of eligible compensation or $7,500, subject to the applicable IRA rules
The key is proper documentation. The work must be real, the pay must be reasonable, and timely records created near the work and payment dates are generally more credible than records reconstructed later.
See how much your child could accumulate in a Roth IRA: Roth IRA Calculator
Learn more: How to Hire Your Kids: The Complete Guide
Sources
- IRS Publication 501: Dependents, Standard Deduction, and Filing Information (filing thresholds for a child with earned income)
- IRS Publication 926: Household employment taxes, W-2 thresholds, and recordkeeping
- IRC §3121(b)(3)(A): FICA Exemption
- U.S. DOL State Labor Laws: Current state wage and child-labor resources
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