Tax for hiring kids to help rental

[Lily Lee]

Hi. We have several rental property under personal name not LLC yet. My 12 and 14 years old have been helping with rental a lot especially over the summer, they pretty much did all the paintings plus lot other jobs. I've paid them each around $5000 into their own bank account.

I just learned about the wonderful tax benefit for hire kids, my question is -- since our rentals are not LLC owned, thus may not considered as 'business', can I still deduct the money paid to kids out of my rental income? if so, I guess line 19 'Other' on schedule E is the place to go or somewhere else?

Do I need to issue them w2?

Thanks in advance!

Lily

[Michael Plaks]

@Lily Lee

Simply putting $5k into their accounts is not enough. You hiring them should have been formalized and documented, including the W2s, just like you would do with an unrelated worker:
https://www.nolo.com/legal-encyclopedia/why-its-tax-smart-hire-your-children.html

1099s are not appropriate for your own 12 and 14-yo kids, because you exercise complete control over their work. This is a definition of an employee, not contractor.

If they are properly hired, then you can deduct their labor. For example, painting would go on the Repairs line, cutting grass on the Maintenance line etc. You do not need an LLC for that.