Tuition, rent, groceries, phone plans, insurance… If your child is in college, you're probably already helping cover some of those expenses—and feeling the weight of it. What most parents don't realize is that how you give that financial support can either cost you more or save you thousands in taxes.

If you're self-employed, this is one of the best times of year to put a smart tax strategy in motion: paying your college-age child through your business. It can turn non-deductible support into a business expense, reduce your overall tax liability, and even qualify your student for education credits you can't claim as a parent.

Let's break it down.

Common scenario

Here's an example of what we see all the time:

Parents are supporting their college-age kids with $1,000/month for rent, gas, food, insurance, phone plans, and more, without a second thought. It's generous, and it's necessary. But none of that is tax-deductible.

Meanwhile, the student isn't claiming themselves on their tax return (or isn't filing at all), and the parent can't take the education credit because their income is too high.

So the money flows out, and there are no tax advantages. That's where this strategy flips the equation.

The tax strategy to help with college costs

If you're self-employed, you can legally hire your child to work in your business, pay them a wage, and convert that support into deductible business expenses.

Here's how it works:

• You hire your child to do legitimate work (filing, admin, digital marketing, customer service, tech support, even cleaning the office).

• You pay them a reasonable wage for the work performed.

• You deduct the wages as a business expense.

• Your child reports the income on their own tax return (typically taxed at a very low rate).

• Your child may now qualify for education tax credits worth up to $3,000.

If structured correctly, the total family tax bill goes down—and the support you were already providing now has a tax advantage.

Real-world example

Let's take one client we recently helped:

• A mother was paying her college student $1,000/month to help with expenses.

• She was also covering her child's cell phone and auto insurance (roughly $500/month).

• As a self-employed business owner, we helped her convert this support into employment:

✓The child received $1,500/month in wages, totaling $18,000/year.

✓The business deducted the full $18,000.

✓The child filed a tax return, paid taxes at the 10% bracket, and used that income to qualify for the education credit.

✓The parents (who earned too much to qualify for the credit) now saw tax savings and education support flow through their child's return.

This wasn't aggressive. It was clean, legal, and incredibly efficient.

Why December matters

To take advantage of this strategy for the 2025 tax year, you must:

• Pay wages before December 31, 2025

• Track hours and document the work performed

• Issue a W-2 or 1099 by January

• File appropriate payroll forms in Q1 2026

If you haven't set this up yet, now is the time to speak with your CPA. Even if you're not sure about running payroll this year, planning now can help you start fresh in January with a clear system.

What counts as "real" work?

Here's a list of tasks your college-age child could reasonably perform for your business:

• Website updates or blog formatting

• Social media management

• Data entry or organizing digital files

• Client gift prep or mailing

• Help with customer service

• Office cleaning or supply runs

• Product packaging or shipping

• Basic bookkeeping tasks

• Photography, videography, or editing for content

As long as the work is real and measurable, and the pay is reasonable for the job, this is a valid business relationship in the eyes of the IRS.

FAFSA and financial aid considerations

This strategy does affect financial aid calculations. When your child reports income on their tax return, it becomes part of the student contribution section on the FAFSA. That can reduce needbased aid in some situations.

But here's the key:

If your income is already too high to qualify for need-based aid, this won't hurt you—and may help open up merit-based or credit-based advantages.

And if your child qualifies for the education credit (American Opportunity Tax Credit or Lifetime Learning Credit), the family may net more than they would from FAFSA aid alone.

Aside from the tax advantages, paying your college-age child to work in your business also creates a platform for learning and growth. You're teaching them how a business operates, how to manage finances, how to deliver genuine value, and possibly inspiring the next generation of entrepreneurs.

Let's run the numbers

Tax strategies only work when the details are correct. If you're curious about whether this fits your family, your income, or your business, let's sit down and take a look.

There's still time to act in December—and set yourself up for a smarter, more tax-efficient 2026.