No, your LLC cannot directly pay for your child’s college tuition as a business expense. However, if your child works for your LLC and is paid a reasonable wage, they can use their earned income to pay for their own education-and this strategy may come with tax advantages.
Hiring your child in your LLC can open up smart tax planning opportunities. While your LLC cannot simply write off tuition costs as a deductible expense, it can pay your child a fair wage for real work. Your child can then use that income to fund their education, potentially lowering your family’s overall tax burden. This approach is legal, practical, and increasingly popular among family-owned businesses.
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1. Why You Can’t Write Off Tuition as a Business Expense
The IRS does not allow businesses, including LLCs, to deduct personal education expenses for employees or their dependents-unless the education is directly related to the employee’s current job and required for that position. Since your child is likely not attending college as a job requirement for your LLC, tuition does not qualify as a legitimate business expense.
Attempting to write off tuition as a business deduction would violate IRS rules and could trigger penalties or audits.
2. The Legal Workaround: Pay Your Child a Wage
Instead of paying for college directly, your LLC can hire your child as a legitimate employee or contractor (depending on the structure of the work). If structured correctly, your child earns income, and they can use that money for any purpose-including tuition, books, and living expenses.
To make this strategy work, you must ensure that:
- The job is real and age-appropriate
- The pay is reasonable for the work performed
- You track hours and issue paychecks or direct deposits
- You file the proper tax forms, such as a W-2
This allows the income to shift from your higher tax bracket to your child’s lower bracket-effectively using the tax code to your advantage without crossing any legal lines.
3. Tax Benefits of Hiring Your Child in the LLC
If your child is under 18 and you operate a single-member LLC (or a spousal partnership LLC taxed as a sole proprietorship), the IRS allows you to:
- Pay your child without withholding Social Security and Medicare taxes
- Skip federal unemployment (FUTA) tax obligations
- Reduce your taxable business income through legitimate payroll expenses
Meanwhile, your child can earn up to the standard deduction limit tax-free. For 2025, the standard deduction for single filers is projected to be around $14,600-meaning your child could earn that much and owe no federal income tax at all.
4. Using the Income to Pay for College
Once your child receives their paycheck, they can use it however they choose. Common options include:
- Paying tuition directly to the school
- Covering textbooks, rent, and other education-related expenses
- Contributing to a Roth IRA or custodial account for future needs
Because the money is theirs, there’s no gift tax involved, and the use of the funds is flexible. Your LLC gets a legitimate tax deduction for the wages, and your child gains earned income they can spend on school or invest for the future.
5. How Much Should You Pay Them?
Wages must be reasonable based on the work done. You can’t pay your child $25,000 per year to occasionally answer emails or shred paper. But if your child helps with:
- Social media management
- Filing and data entry
- Basic marketing or web design
- Inventory or shipping support
You may be able to justify a few thousand dollars or more per year-especially if they consistently contribute and develop skills that benefit the business. Document everything and keep records of time worked and job duties.
6. Considerations for FAFSA and Financial Aid
One downside to this strategy is that earned income can impact your child’s financial aid eligibility. When your child fills out the Free Application for Federal Student Aid (FAFSA), their income will be considered in the calculation of Expected Family Contribution (EFC).
That said, a few thousand dollars in income usually won’t make a significant difference in aid eligibility, and the tax savings may outweigh any minimal impact. You can also reduce visibility of those funds by contributing to a Roth IRA, which doesn’t count against FAFSA asset tests.
Your LLC cannot directly pay for your child’s college tuition, but it can legally pay your child wages for real work. This earned income can then be used by your child to cover tuition, books, and other education expenses. When done correctly, it’s a legitimate tax-saving strategy that benefits your business, your child, and your family’s finances. Just be sure to document everything, stay within IRS guidelines, and consult a tax professional if you’re unsure about your specific setup.
