Maximizing Tax Benefits and Skill Building: A Guide to Summer Employment for Your Child

Summer employment opens doors for young individuals far beyond a simple paycheck—it cultivates vital life and professional skills while presenting unique tax-advantaged savings opportunities. For parents and guardians, understanding the landscape of youth summer jobs is especially critical in today’s evolving tax environment and labor market.

With the 2025 standard deduction for single filers rising to $15,000, your child can earn up to this amount without facing federal income tax, making seasonal work an attractive and tax-efficient option. Additionally, earned compensation unlocks avenues for retirement savings, such as contributing up to the lesser of $7,000 or earned income to an IRA. Combining the standard deduction with a deductible traditional IRA contribution, your child could potentially have up to $22,000 of tax-free income in 2025. Still, a Roth IRA provides long-term advantages with tax-free growth and withdrawals, although contributions are not deductible.

If your child is hesitant to use their earnings for retirement savings, consider gifting them the IRA contribution. This not only sets them up for future financial security but also encourages a habit of saving early on—a move that can generate substantial growth over decades.

Popular Summer Jobs for Kids and Their Tax Implications

Fast Food Services: Working in food service exposes teens to teamwork, time management, and workplace responsibility. Employers issue a Form W-2, reporting wages and withholdings. Remember, tip income may need to be reported separately if not included on the W-2.
Babysitting: This role instills responsibility and childcare skills. Babysitting income is generally taxable, even without a W-2. Accurate record-keeping is essential to fulfill potential reporting obligations.
Lawn Mowing & Gardening: These entrepreneurial ventures teach business basics and scheduling. If employed by a landscaping firm, children will receive a W-2; independent contractors still must report earnings above their standard deduction.
Lifeguarding: Older teens benefit from leadership experience and first aid certification. Lifeguards are classified as employees and should expect a W-2.
Pet Sitting & Dog Walking: Ideal for animal lovers, these roles foster empathy and customer service skills. Income is typically reportable, but a W-2 is unlikely unless employed by an agency.
Arts & Crafts Sales: Young creators selling at markets or online gain marketing and entrepreneurship exposure. Hobby income is reportable; business income is taxable on profits above the cost of goods sold.
Online Tutoring: Academic high-achievers can tutor online, strengthening both core knowledge and communication skills. These earnings are also subject to tax reporting.
Social Media Management: Tech-savvy teens help small businesses grow their digital presence, learning marketing and business development. Income may be reported with a W-2 (employee) or on a tax return as self-employment income.
App or Game Development: For those interested in technology, creating apps or games is an accessible entrepreneurial path. Record all revenues, as they may be taxable depending on the scope of the activity.

Tax-Advantaged Strategies: Employing Your Child in Your-Owned Business

If you operate a family business, the summer presents a prime opportunity to employ your child—creating tax savings and providing practical work experience. Payments must reflect reasonable compensation for actual services performed and legitimate work performed, adhering to IRS guidelines for family employment.

Hiring your child ages under 18 in an unincorporated business exempts their wages from FICA (Social Security and Medicare taxes). Furthermore, payments to children under 21 are not subject to FUTA (Federal Unemployment Tax). These exemptions do not apply to incorporated businesses or partnerships with non-parent partners.

Example: As a parent in the 24% bracket, paying your child $16,000 for genuine work can save $3,840 in income tax, reduce self-employment tax, and shield your child’s income up to the standard deduction. If a $7,000 IRA contribution is made, the taxable income may be eliminated entirely.

Key Benefits of Summer Employment for Kids

Skill Development: Enhances teamwork, leadership, and problem-solving abilities.
Financial Literacy: Early exposure to budgeting, saving, and tax responsibilities.
Work Ethic: Instills the value of dedication and time management.
Independence & Confidence: Fosters maturity and self-reliance.
Tax Awareness: Introduces youth to income reporting, deductions, and the basics of federal taxation.

In summary, summer jobs empower kids not only with crucial soft skills and real-world experience but also with formative financial literacy—including retirement savings know-how and tax compliance. For families with a self-employed parent, employing your child efficiently can maximize your overall tax strategy while delivering tangible benefits for your child’s future.

If you have questions about youth employment, tax planning for children, or hiring your child in your business, our office is here to provide expert guidance tailored to your individual needs.

Share this article...

Facebook

Twitter WhatsApp LinkedIn Pinterest Pocket Reddit Email

Want tax & accounting tips and insights?

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .

FAQs Frequently Asked Questions

Type your questions here.

Please fill out the form and our team will get back to you shortly The form was sent successfully

First Name *

Last Name *

Email *

Mobile Number

Message *