Hiring Family Members at the Shop Can Lower Taxes and Unlock Access to Educational Investments
Putting children or spouses on the payroll of barbershops in the United States allows access to specific savings plans. The strategy requires attention to tax rules to maximize benefits.
In the United States, salon and barbershop owners are rediscovering the tax potential of putting family members on the payroll. This practice goes beyond simple operational expense deductions, as it transforms children's income into "earned income," an essential requirement for accessing investment vehicles that were previously out of reach.
For children, this income opens the doors to educational plans like the 529 Plan. In these funds, growth is free from federal taxes until withdrawal for qualified expenses. In 2025, couples can make advance annual contributions of up to $190,000 without taxing the gift. Beyond college, resources from these plans now cover student loan payments, with a lifetime limit of $10,000 per beneficiary.
Another viable option is the Roth IRA account, which depends directly on the salary received by the minor. Without income, there is no possible contribution. The great attraction here is that the retirement account balance does not appear as an asset when applying for federal student aid, although withdrawals may impact future income calculations.
Custodial accounts, governed by state laws regarding transfers to minors, offer the greatest flexibility. There are no statutory contribution limits or penalties if the money is used for the child's benefit outside of a school context. However, unearned earnings within this account are taxed at the parents' rates and, upon reaching legal age, the young person gains total control over the funds.
The situation is different for spouses. Hiring a spouse in the shop does not generate savings on payroll taxes, as salaries are subject to the same social security charges that self-employment income would have. The only available exclusion is the federal unemployment tax, which does not apply to wages paid to the partner.
Therefore, for those working with barbershops, the decision requires careful analysis. While hiring children can unlock educational and retirement investments, paying a spouse functions more as an administrative formality than as a significant tax lever.
BarberRicci newsroom, with information from Salon Today (EUA).