How Halfmore affects my and child's taxes?

Halfmore is designed to help you create tax-advantaged savings opportunities for your child. Here’s how it can impact your and your child's taxes:

Impact on Your (Parent)'s taxes

Household Employer taxes

Halfmore enables you to hire your child under a household employment arrangement. This means you, as the parent, become a household employer and may be subject to employer tax obligations.

However, if your only household employee is your child, IRS exempts you from several employer taxes. Specifically, IRS does not require household employers to pay FICA (Social Security and Medicare tax) or FUTA (Federal Unemployment tax) taxes on wages paid to a child under the age of 21. (IRS Publication 926)

Additionally, if your only household employee is your minor child, then you are not required to file Schedule H when submitting your tax return since wages you paid to your child will be not counted toward taxes and you aren't withholding any federal income taxes.

Child tax credit

Hiring your child as a household employee does not affect their dependent status. A child's eligibility as your dependent is unrelated to whether they have earned income. As long as you provide more than half of their financial support and they meet the other qualifying criteria (which are not altered by using Halfmore), you may continue to claim them as a dependent and any related tax credits.

Impact on my child's taxes

Wages your child earns through household employment are considered earned income and subject to the standard deduction. For 2025, the federal standard deduction is $15,000. That means, if your child earns less than this amount, they will not owe any federal income taxes.

Halfmore processes payroll up to the annual Roth IRA contribution limit, which is $7,000 for 2025. If your child's sole income is processed through Halfmore, the amount will remain below the federal standard deduction threshold. That means your child will owe no federal income taxes.

Kiddie Tax implication

The Kiddie tax is levied on child's unearned portion of the income, such has an interest, dividends or capital gains from investments. Since Roth IRAs are tax-advantaged accounts and do not produce taxable income while funds remain inside, they are not subject to the Kiddie Tax. This means your child can grow investments in a Roth IRA tax-free without triggering additional taxes.

Halfmore aims to provide a straightforward way to leverage tax-efficient savings strategies for your child's financial future, primarily by enabling them to earn income and contribute to tax-advantaged accounts such as Roth IRA.