When Your Children Work for Your Business

If your children help you run your business, you can pay them a reasonable salary and deduct it from your business income when preparing your tax return. The salary must be reasonable for the type of work performed.

Putting your kids on the payroll could mean deductions on your tax return, and might allow them to start accumulating RRSP contribution room which can be used to reduce their taxes in future years. The other advantage is that your kids might be taxed at a lower rate than you.

Don’t forget to make appropriate payroll withholdings. Note that CPP premiums are not required until your child turns 18 and that EI premiums are generally not required where the employee and the employer do not deal at arm’s length.

Consult the advice of a Chartered Professional Accountant for more information.