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Business owners can reduce their taxable income if they pay their spouse and children a salary. The catch, though, is that your family members actually have to earn their wages. It’s something many business owners don’t take seriously enough, says David Rumer, vice-president of marketing development with Sage, a small-business management solutions company in Toronto. Moreover, make sure that when employing a family member you’re paying a realistic salary. “You can’t hire your spouse to do the books and pay them an income that’s way out of whack with market rates,” says Rumer. Also, be extremely detailed when it comes to family members: Keep invoices and make sure every penny paid is accounted for.
The bottom line: When you pay your kid $10,000 a year to run business-related errands (and they actually do the work), you can reduce your taxable income owed by that same amount.
More tax tips here.