How much can I pay my child employee tax-free in 2026?

In 2026, the standard deduction for a single filer is $14,600. If your child earns $14,600 or less in wages from your STR business, their standard deduction completely shelters the income — they owe zero federal income tax. This is earned income (wages), not unearned income, so the kiddie tax rules under IRC §1(g) do not apply.

Does my child have to file a tax return if I pay them wages?

A dependent child must file a federal tax return if their earned income exceeds the standard deduction ($14,600 in 2026) or if any income tax was withheld (to get a refund). If their wages are at or below $14,600 and no tax was withheld, filing may not be required — but many tax professionals recommend filing anyway to establish a record and potentially receive any withheld taxes back.

What is the kiddie tax and does it apply to wages paid to my child?

The kiddie tax (IRC §1(g)) taxes a child's unearned income (dividends, interest, capital gains) above $2,600 at the parent's marginal rate. It does NOT apply to earned income — wages your child receives for legitimate work are taxed at the child's own rate, regardless of age. This is why hiring your child for real work is much more tax-efficient than giving them investments.

April 6, 2026 · 7 min read

How Much Can I Pay My Child Before They Owe Taxes?

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In 2026, you can pay your child up to $14,600 in wages from your STR business before they owe any federal income tax — the standard deduction under IRC §63(c) shelters that amount entirely. Wages are earned income, so the kiddie tax rules that apply to children's investment income do not apply, and every dollar paid is fully deductible from your Schedule C.

The Standard Deduction Shield

Every taxpayer — including your child employee — gets a standard deduction that shelters their first dollars of income from federal tax. For 2026:

Filing Status	2026 Standard Deduction
Single (including dependents with earned income)	$14,600

If your child earns exactly $14,600 in wages from your STR business, their taxable income is $0 after the standard deduction — they owe zero federal income tax. You deduct the full $14,600 as a business expense on your Schedule C, reducing your taxable income at your marginal rate (which could be 22%, 24%, 32%, or higher).

Tax Savings Example

You're in the 24% federal bracket plus 15.3% self-employment tax. You pay your child $14,600 in legitimate wages. Your savings: ~$5,738 in reduced SE tax and income tax. Your child's tax bill: $0. Net family tax savings from this one move: roughly $5,700/year. Over 5 years of their childhood, that's $28,000+ in tax savings, plus whatever the money grows to if invested.

What About Above $14,600?

Income above the standard deduction is taxed at your child's own rates — not yours. For 2026, a child in the 10% bracket pays 10% on income up to approximately $11,600, then 12% on the next tier. Since most children have no other income, wages of $14,600–$26,200 are still taxed at just 10–12%.

Compare that to your marginal rate of 24–37%. Even if your child pays some tax on wages above $14,600, the family's combined tax burden is still significantly lower than if that income stayed in your hands.

Kiddie Tax: Why Wages Are Different From Investments

The "kiddie tax" under IRC §1(g) taxes a child's unearned income (dividends, interest, capital gains, rental income from property they own) above $2,600 at the parent's marginal rate. This prevents high-income parents from shifting passive investment income to children in lower brackets.

Wages are earned income — the kiddie tax does not apply. When your child receives wages for genuine work (cleaning, laundry, photography, guest check-ins), that income is taxed at the child's own marginal rate, regardless of your income level or the child's age (up to age 18 working for a parent, or full-time student up to 23).

Requirements for the Deduction to Stand

The IRS will scrutinize family payroll. To defend the deduction:

Work must be genuine — real tasks that your STR business requires, performed by the child
Pay must be reasonable — what you'd pay an unrelated person for the same work
Pay by check or direct deposit — not cash, not buying them things
Keep records — time logs, task lists, photos of completed work
File employment taxes correctly — sole proprietors with children under 18 are exempt from FICA; everyone needs proper W-2s issued

See the full strategy guide at Hiring Kids in Your STR Business and documentation requirements at How to Document Child Employee Hours for the IRS.

State Taxes: Check Your State

Federal standard deduction is $14,600, but states have their own rules. Some states conform to the federal standard deduction; others have lower amounts. A few states have no income tax at all. Check your state's standard deduction for dependents to determine the tax-free threshold in your state.

The Roth IRA Bonus

Once your child has earned income, they can contribute to a Roth IRA — up to the lesser of their wages or $7,000 in 2026. Even if they contribute the full $7,000 and still have $7,600 in wages left, they owe no federal tax on any of it (covered by standard deduction).

A $7,000 Roth IRA contribution at age 12, growing tax-free for 53 years to age 65 at a 7% average return, becomes approximately $170,000 in tax-free retirement income — from one year of legitimate work in your STR business. See our guide on funding your child's Roth IRA from STR wages.

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Disclaimer

This article is for informational purposes and does not constitute tax, legal, or financial advice. Tax rules vary based on your specific situation, filing status, entity structure, and jurisdiction. Always consult a qualified CPA or tax professional for guidance on your specific tax situation. IRS rules and thresholds are subject to change — verify current requirements at irs.gov before filing.