Paying Your Children Through Your Practice: Tax Benefits for New Jersey Dentists

October 12, 2026

Running a dental practice means juggling patient care, staff management, and a long list of financial decisions, and one strategy many dentists overlook is putting their own children on the payroll. If you have kids who help out around the office, whether that’s filing paperwork, managing social media, or answering phones after school, paying them a fair wage for that work may lower your tax bill while giving them real-world experience.

LLI Advisory Group has spent decades working exclusively with dental practices, and this kind of tax planning is exactly where that specialized focus pays off. Because LLI works with hundreds of dental clients, the team can look at a strategy like hiring your children and tell you not just whether it is allowed, but whether it makes sense given your specific practice structure, your tax bracket, and your long-term goals for the business.

How Hiring Your Child Can Lower Your Tax Bill

The core idea behind this strategy is simple. Wages paid to your child are shifted out of your tax bracket, which is likely higher, and into your child’s bracket, which is often much lower or even zero. Under current IRS rules on family employment, wages paid to a child are not subject to Social Security or Medicare taxes if the child is under 18, and are exempt from Federal Unemployment Tax if the child is under 21, as long as the business is a sole proprietorship or a partnership where both partners are the child’s parents.

That structure matters. Many dental practices operate as an S corporation or a professional corporation, which do not qualify for this specific payroll tax exemption, though the income-shifting benefit may still apply in some cases. This is one of the many reasons why generic tax advice rarely fits a dental practice well. The rules change depending on how your practice is legally organized, and getting that wrong could mean missing out on real savings or, worse, creating a compliance issue.

Real Work, Real Wages, Real Documentation

The IRS does not take these arrangements at face value, and neither should you. For this strategy to hold up, your child needs to perform actual work that benefits the practice, and the pay needs to reflect what that work is reasonably worth in your area. Overpaying a teenager for a few hours of filing each week is the kind of red flag that could unravel the entire deduction if your practice is ever audited.

Keeping clean records protects you. Track hours worked, keep a simple job description, and process payroll the same way you would for any other employee, including a W-4 and W-2. This is not a shortcut around your usual bookkeeping. It is simply extending the same discipline you already apply to your practice’s other financial decisions to this one.

Why the Details of Your Practice Structure Matter

We know that no two dental practices look the same, and a strategy that works well for one dentist may not translate cleanly to another. That is why our approach starts with actually analyzing your practice’s financial statements rather than applying a one-size-fits-all recommendation. Just as we look at how your dental supply costs or staff expenses compare to industry benchmarks, we apply that same granular review to a strategy like paying your children, so the recommendation actually fits your numbers.

This kind of tailored analysis is part of what separates a dental-specific CPA from a general accountant who happens to have a few dental clients. Understanding the language of a dental practice, from production numbers to hygiene department performance, means we can spot when a strategy like this is worth pursuing and when your money is better spent elsewhere.

Retirement Savings for Your Child

One added benefit of paying your child a legitimate wage is that it opens the door to a custodial Roth IRA. Contributions are limited to the amount of the child’s earned income, but starting that account early can make a meaningful difference over time, since the money has decades to grow before retirement. It is a small step that pairs naturally with the income-shifting benefit already built into this strategy.

Get Proactive Tax Guidance for Your Dental Practice

We believe a strategy like paying your children through your practice is a good example of the proactive approach we bring to every dental client. Rather than waiting until tax season to look for savings, we work with dentists throughout the year to identify opportunities like this one, walk through whether it fits your practice structure, and help you put the right documentation in place from the start. LLI Advisory Group has specialized exclusively in supporting dental practices, and that focus means we understand the operational and financial details that a general accountant may miss.

If you have been wondering whether paying your children through your practice could work for your situation, our team can walk through your specific numbers and structure to figure out if it makes sense. Reach out through our contact page to schedule a conversation with our dental CPAs about your practice’s tax planning.