Hiring your kids is not some hidden trick. A minor can earn a set amount of money each year completely tax free, and a business that pays someone for real work gets to deduct it. There is no secret provision that only applies because the employee happens to share your last name. What separates the people who do this cleanly from the people who turn a legal deduction into a problem comes down to two decisions almost nobody explains properly.
The first decision
Which entity actually cuts the check. Pay your kid directly out of your S corp or C corp and the money is still tax free to your child and still deductible to your business, but you as the employer still owe the employer side payroll taxes most people have never heard of by name, federal and state unemployment tax. It is only a couple percentage points, but it is money you did not have to spend.
Pay your kid instead out of a family management company set up as a simple sole proprietorship, one with a service contract to your main business for things like administrative work, marketing, or bookkeeping, and that employer tax disappears entirely. Same deduction, same tax free income for your kid, one less tax on top of it. Neither path is illegal, one is just better.
Now let me be straight, this works because it is your own actual kid, and it does not necessarily play out identical for everybody. It can shift depending on how old your kid is and what state you are in, so confirm it with whoever runs your payroll or your CPA before you build it out for your own family. I am giving you the concept, not a guarantee for your exact situation.
The second decision
This is the one that actually gets people in trouble, and it has nothing to do with entities. It is timing and amount. Here is the pattern that turns this from a real strategy into a real problem. An entrepreneur gets to December, realizes they owe a pile of money in taxes, remembers they have three kids, and writes each of them a check for exactly the maximum tax free amount, for work that never actually happened. That is the deduction being fake, and fake is a lazy, screwed up version of a strategy that works fine when you actually do it right.
Your kid needs a real job they actually do, paid the way you would pay any other employee, ideally spread out across the year instead of dumped in one check in December. And that maximum tax free number is not stuck in stone. It moves most years along with the standard deduction, so whatever your cousin told you two years ago is probably already wrong. Look up the current year figure or ask your CPA before you run payroll.
Once you know the real number, do not pay them that exact figure to the penny. A suspiciously round number that lines up perfectly with the legal limit looks manufactured to an auditor, even when it is not. Nobody at the IRS wrote that down as an actual rule, there is no code section against round numbers. This is just me telling you how it looks from the outside, and how I would want my own file to look if anybody ever pulled it. Pay them a specific, odd amount for the actual hours they worked, and you have something that looks like payroll instead of a year end tax maneuver.
This is not for a kid who does nothing and gets a check anyway.
Filing, folding, driving you places once they have a license, helping at the office, managing your social media, all of that counts, and the job does not have to be impressive. It has to be real, documented with a basic written agreement, and paid like actual work.
None of this changes the bigger point. A tax strategy is only as strong as the structure underneath it, and the structure here is simple: real work, real pay, the right entity holding the paycheck. Get those three right and there is nothing to worry about.