Unbelievable: Get a Tax Deduction on YOUR Roth IRA?!

Welcome back to We're Talking Money. I'm Dustin Hocken, wealth advisor at OmniStar Financial Group. Today I'm going to share with you a financial planning strategy that makes one of the best financial tools even better.

If you're not sure what a Roth IRA is, it's an investment account that's funded with after-tax dollars that grows tax-free and can be distributed 100 tax-free in retirement. But what if I told you that there's a way where you can receive a tax deduction on the money going in while still receiving 100 tax-free distribution on the way out?

This strategy won't work for everyone, but if you're a business owner, you can actually employ your child in your business. Now, you might be saying, what's my child going to do in my business? So depending on their age and your business, we might have to get a little creative. One way would be to create a brochure for your business and hire your children as models for the brochure. This way they can be compensated through the business for their services.

You'll pay them six thousand five hundred dollars from your business, so it's a tax deduction to you, and your children actually receive this tax-free as well, because it's under the 12 950 limit that a minor can earn in 2023 while still being in a zero percent tax bracket. So they receive their 6500 dollars tax free, and then you open a Roth IRA for them and you take that 6500 and use that money to fund the Roth IRA. It's incredibly powerful tool, not only for them but also for you as a business owner, because remember, you're getting a tax deduction.

Let's look at the impact of this long term. Now, let's assume that we employ your child from age 10 to age 18 and we pay them six thousand five hundred a year, and that money goes into a Roth IRA for eight years. Let's also assume that no further contributions are made until their retirement or age 60. That Roth IRA for them is worth 1.75 million dollars assuming a percent interest. That's only based on you contributing fifty two thousand dollars for your child. The amount of time that they have to let compounding interest work in their favor, it's incredibly powerful.

I'd love to hear if you've heard of this strategy or what are your thoughts on the strategy in general. Post in the comment section below. You'll want to speak with your CPA to confirm this is feasible for you and your business, but it should definitely be a talking point and something to discuss with them if they haven't brought this idea up too.

I hope that's helpful. Please like, share, subscribe. We're always posting great informative financial planning videos that you don't want to miss. Thank you, talk to you soon.

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