## Quick Answer

**Yes**, you can hire your child through an S-Corp and deduct their wages as a business expense. Your child can use this earned income to fund a Roth IRA. **However**, the FICA exemption under IRC §3121(b)(3)(A) does NOT apply to S-Corps because the corporation (not you personally) is the employer. You must pay the full 15.3% in Social Security and Medicare taxes on their wages. Despite losing this exemption, the strategy is still valuable for income shifting and Roth IRA funding.

## The Details

### What You Get (S-Corp)

- **Wage deduction:** Deduct wages as a business expense
- **Income shifting:** Move income from your bracket to theirs
- **Roth IRA eligibility:** Child has earned income to contribute

### What You Don't Get (S-Corp)

- **FICA exemption:** Must pay 15.3% payroll taxes on wages

The FICA exemption under [IRC §3121(b)(3)(A)](https://www.law.cornell.edu/uscode/text/26/3121) only applies when a child under 18 is employed by their parent. An S-Corp is a separate legal entity—the S-Corp (not you personally) is the employer, so the exemption doesn't apply.

### Comparison: S-Corp vs. Sole Prop

| Benefit | Sole Prop | S-Corp |
| --- | --- | --- |
| Wage deduction | ✓ | ✓ |
| Income shifting | ✓ | ✓ |
| Roth IRA eligibility | ✓ | ✓ |
| FICA exemption (under 18) | ✓ | ✗ |

## Is It Still Worth It?

**Yes.** Even without the FICA exemption, hiring your child through an S-Corp provides:

1. **Tax bracket arbitrage:** If you're in a 32% bracket and your child is in 0% (under $16,100), you save 32 cents for every dollar shifted.
2. **Roth IRA opportunity:** Your child gets earned income to fund tax-free retirement growth.
3. **Business deduction:** The wages reduce your S-Corp's taxable income.

### The Math

Say you pay your child $5,000 through your S-Corp (32% bracket):

- Your tax savings: $1,600 (32% deduction)
- FICA paid: $765 (employer + employee)
- **Net benefit:** $835 + Roth IRA opportunity

The FICA cost reduces the benefit but doesn't eliminate it. And the Roth IRA compounding dwarfs the FICA cost over time.

## Important Notes

- All the same documentation requirements apply
- You must run payroll and withhold FICA
- Issue a W-2 at year end
- Consider whether restructuring makes sense (consult your CPA)

Learn more: [How to Hire Your Kids: The Complete Guide](/content/guides/hire-your-kids/index.html)

## Sources

- [IRC §3121(b)(3)(A)](https://www.law.cornell.edu/uscode/text/26/3121): FICA Exemption Requirements
- [IRS Family Help](https://www.irs.gov/businesses/small-businesses-self-employed/family-help): Employing Family Members