I Made Money Off Pictures of My Kid on Instagram—What Should I Do With It?
Whether it's a one-time Instagram post that catches the eye of a start-up or an ongoing collaboration with a major brand—if the content featuring your child results in a pay day, your child needs to get paid.
The influencer marketing industry is exploding, thanks in large part to the advent of mommy bloggers, according to Money. As more parents enter the market hoping to make a quick side hustle, the money side can become a bit of a Wild West—especially when it comes to money made off content featuring children.
While there is a "Coogan Law" in some states that require a portion of a child's earnings to go into a special trust fund, these laws have not kept up with the quickly-evolving pace of influencer marketing.
"There is no regulation around compensation for children appearing in social media content produced by their parents," says Sara Williams, lead talent manager at Sociable Society. "We advise parents to set up a legal incorporation for their business that allows them to pay their children a portion of the income from their business." But whether the parent decides to do so is fully up to their discretion.
"If you're a parenting influencer, you should be putting money away for your child," says Brandi J. Riley of Courage to Earn, a community platform that advises women on how to earn money in the digital and tech space. Content creation is hard work. And if children are participating in that work, they deserve to be paid. But how you pay your child requires some finesse.
Kesha JonTae, tax consultant and owner of the Millennial Taxpert, encourages her clients not only to pay their children—but hire them as well. "When you're using your kids in your business, you should really consider making them employees and paying them a salary," she says. JonTae recommends this action as a strategy to save money come tax time. "You can actually pay them as employees, and shift some income from your tax bracket, which would typically be much higher, down to their tax bracket, which would be probably zero, depending on how much money they make."
Depending on your state, your child could earn up to $12,000 annually before they are required to pay income tax. And modeling for the camera isn't the only work a child could reasonably be compensated for. Any assistance in content creation, whether it's set-up, clean-up, or consulting, could be considered paid work for your child. "You're either going to hire your child or hire someone else," says JonTae. "So it's a valid deduction."
Some may worry that hiring children as employees will be an invitation for a tax audit, especially in the influencing world where work is seen as "fun" and not necessarily labor.
"I don't care if it's simply unboxing presents—that's work," said Sheila James Kuehl, a former child star and legal expert, to the Guardian in 2019. "It is not play if you're making money off it."
JonTae reminds us that parents have hired children to help with family businesses for decades. The key is in the documentation. For parents who are considering paying their children as employees of the family influencing business, JonTae urges those parents to make everything official. "They need to set themselves up as an employer and get an Employee Identification Number (EIN) if they don't already have one," she says. The child will need to be paid through a set payroll system and even fill out a W-4 to document them as income-earning employees in the eyes of the IRS. The parent can further protect themselves by creating a job description for the child so if an audit does come, there will be proof that the child's work was necessary and valid—which it is.
But hiring your own children as employees isn't required. Jessica Turner, owner of The Mom Creative, opted to set aside money for her children in a savings account rather than officially hire them, on the advice of her accountant. "I do pay my children if they are in branded content," Turner says. She reports paying her kids flat rates when they participate in one-time branded content and offers a percentage of the profits made from affiliate link content.
There are several options for parents who choose to set aside income earned for their children. A simple checking or savings account with your bank is one option; there are also special, custodial trust accounts a parent can arrange for a child so their money is kept safe until a certain age.
Each family's situation is unique. JonTae encourages parents to consult with an expert to learn best options for their families. While there are some excellent tax benefits to paying children as employees, there can also be some downsides. For one, if an older child is being paid enough to support themselves, the parent may lose the ability to claim them as dependents. But JonTae encourages looking at the big picture. "You could still end up saving more money by paying them as an employee even if you lose that dependent exemption."
Paying children for their work brings more than financial benefits—when children are paid for their labor, they learn the proverbial value of a dollar. Children learn about money through example and experience, according to the University of Nebraska-Lincoln's Early Childhood Development Center.
For Jessica Turner, sharing the wealth with her children when they help with her work is important to her as a parent. "I think it really teaches them about entrepreneurship and gives them a great perspective into the work I'm doing and how they're contributing to it," she says. "I think they'll be very happy come college."