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Saving Over $23,000 in Taxes as a Family Business

  • Writer: Michael Urch
    Michael Urch
  • May 30
  • 3 min read

Can Your Family Business Help You Pay Less Tax?


One of my clients is a plumber who owns and runs his own business.


He employs his wife and four children. 

Recently, we were able to do some pretty cool things for them that allowed them to pay less tax.


You may be in a similar situation, so keep reading to find out how we saved this family over $23,000 in tax in 2025.


By employing his kids, my client is able to keep money in the family while receiving a tax deduction.
By employing his kids, my client is able to keep money in the family while receiving a tax deduction.



As a CERTIFIED FINANCIAL PLANNER,™ Michael advises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning.



Tax Deductions with a 401k Plan Can Save You Money

 

By setting up a 401(k) plan, my client (the business owner) can put away up to $31,000 as a pay check deferral.

 

In addition, through profit-sharing contributions, he can contribute up to another $46,000—for a total of $77,000.

 

Assuming a 24% marginal tax rate for Federal and 5% for state (he lives in MA), this deduction saves him $23,330 in taxes for 2025.



Tax Deductions by paying Kids


By employing his kids, he is able to keep money in the family while receiving a tax deduction.


The standard deduction available for a single taxpayer in 2025 is $15,000. If his kids make $15,000 or less in income for the year, it is not taxable to them because it is less than the amount of the standard deduction.

 

In this case, his kids are in their upper teens and early 20s.


It gives him a way to help them put money toward school/living expenses, while also getting valuable help for his business and a tax deduction for the wages.



Kids Can Qualify for Roth Contributions


Since they have earned income, his kids are now eligible for Roth contributions. He can contribute to these Roth IRAs on their behalf to set them up for long-term financial independence.



Family Members Can Receive 401(k) Profit-Sharing 


Every family member has the potential to receive a profit-sharing contribution. In this case, since there are no non-family members in the business, he is able to avoid non-discrimination testing and decide what makes the most sense to do for contributions.



Your Advisor Should Be Helping to Guide Your Tax Planning


If you're a business owner, you may be in a similar situation where having a great tax planning strategy can help save your family money.


Is your financial advisor guiding you through the tax planning process each year and reviewing your tax return?


If not, it may be time to switch advisors.


And, if you aren't working with a wealth management team, I recommend you schedule a call today.



Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial.

About the Author

Michael Urch

As a CERTIFIED FINANCIAL PLANNER,™ Michael advises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning. He prides himself on being a professional advisor who puts planning before products. This is one of the reasons he was attracted to 360 Financial’s client-focused culture. Michael likes to start with each client’s “why.”


By understanding what’s truly important to them, the “what” of investment and planning strategies can be custom-designed to support their long-term ambitions.



Schedule a Call

Schedule a 15-minute introductory call with a 360 financial advisor to see how we can help with your retirement, estate, tax, and financial planning. As a team of wealth management specialists working in a fiduciary environment we provide unbiased guidance to our clients.







The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

This is a hypothetical example and is not representative of any specific situation. Your results will vary. 


This information is not intended to be a substitute for individualized tax advice. We suggest that you discuss your specific tax situation with a qualified tax advisor.


 A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

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360 Financial

360 Financial is an independent wealth management firm with a team of specialized financial advisors and financial planners.

 

Founded by Mike Rogers, AIF®, 360 helps investors with sudden wealth, retirement planning, tax planning, estate planning, and business financial planning. 

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