Let’s face it: taxes are about as fun as a rainy day on set. But just like nailing that big audition, tackling taxes is all about preparation, a little know-how, and maybe a deep breath or two. Whether you’re a seasoned stage mom or a newbie navigating your child’s first gig, this guide is here to help you conquer taxes with confidence—and maybe even a smile.

Step 1: Filing Options—The “Who’s on First?” of Taxes

When it comes to filing taxes for your child actor, the IRS doesn’t care if they’re 8 or 18—if they earn income, they need to file. But don’t panic! Here’s the lowdown on your options:

Individual Filing: Think of this as the “solo act” approach. Your child files their own tax return, even if they’re still in elementary school. It’s straightforward but requires careful record-keeping.

Loan-Out Corporation: This is the “big leagues” option. If your child is consistently booking high-paying gigs (we’re talking $100,000+ per year), setting up a loan-out corporation might make sense. It’s like creating a mini-business for your child, complete with tax perks and liability protection. But beware—it’s not for the faint of heart (or wallet). More on this later!

Parental Reporting: If your child’s income is on the smaller side (under $13,850 for 2023), you *might* be able to include it on your own tax return. It’s like adding a side dish to your main course—simple, but not always the best flavor.

W-2 vs. 1099-NEC: What’s the Difference?

1. W-2 Income (Employee Income)

If your child books a job where the production company withholds taxes from their paycheck, they’ll receive a W-2 form at tax time. This income is considered employee wages and is taxed accordingly.

2. 1099-NEC Income (Self-Employment Income)

Many acting jobs (especially non-union projects, commercials, or influencer gigs) pay kids as independent contractors rather than employees. If your child earns over $600 from a job, they’ll receive a 1099-NEC form, which means no taxes were withheld—and they’re responsible for paying self-employment taxes.

🚨 Important note: Even if a child earns less than $600 from a job and doesn’t receive a 1099-NEC, they still have to report that income to the IRS.

Self-Employment Tax and Child Actors

If your child receives 1099-NEC income, they’re technically self-employed, meaning they’re responsible for self-employment tax (which covers Social Security and Medicare).

The self-employment tax rate is 15.3% of net earnings.

•Even as a minor, this tax still applies if they earn over $400 in 1099-NEC income.

•Self-employed actors can deduct business expenses to reduce their taxable income.

Action Step: Grab a cup of coffee, gather your child’s income documents (W-2s, 1099s, etc.), and chat with a tax pro to figure out the best approach.

Step 2: Loan-Out Corporations—The “Fancy Footwork” of Taxes

Should My Child Actor Have a Loan-Out Corporation?

If your child is consistently booking high-paying acting jobs, you may have heard about setting up a loan-out corporation to handle their income. But what exactly is it, and does your child need one?

What Is a Loan-Out Corporation?

A loan-out corporation (or LLC) is a business entity that an actor (or their parents) creates to handle their earnings. Instead of being hired as an individual, the production company hires the corporation, which then pays the actor as an employee.

Why Do Some Child Actors Use Loan-Out Companies?

✔ Tax savings – Corporations may allow for better tax deductions and lower overall tax liability.

✔ Liability protection – Keeps finances separate from personal assets.

✔ Retirement & benefits – Some actors use a loan-out to set up 401(k) plans, health insurance, or other benefits.

✔ Business deductions – A corporation allows for additional write-offs, like business meals and office expenses.
Does Your Child Need a Loan-Out Corporation?

For most child actors, filing as an individual is sufficient. However, if your child is making $100,000+ per year consistently, a loan-out corporation might be beneficial.

💡 Key Considerations:

• Costs: Setting up and maintaining a corporation involves legal fees, annual filing fees, and tax prep costs.

• More complex taxes: A corporate tax return (Form 1120 or 1120S) must be filed, in addition to your child’s personal return.

• Requires business management: Parents must act as business managers and keep separate financial records for the corporation.

How Loan-Out Companies File Taxes

1. The loan-out corporation is paid by the production company and issues a W-2 paycheck to the actor (your child).

2. The corporation may deduct business expenses before paying the child their salary.

3. The corporation files a corporate tax return, and your child still files a personal tax return reporting their W-2 wages.

Action Step: If you’re considering a loan-out corporation, consult a tax pro who specializes in entertainment industry accounting. They’ll help you decide if it’s worth the spotlight.

Step 3: Write-Offs—The “Hidden Gems” of Taxes

Here’s where things get fun (yes, taxes can be fun—sort of). Did you know you can deduct many expenses related to your child’s acting career? It’s like finding money in the couch cushions! Here’s what you can write off:

Classes and Training: Acting lessons, voice coaching, dance classes—anything that helps your child hone their craft.
Travel Expenses: Flights, gas, and even hotel stays for auditions or jobs.
Marketing Materials: Headshots, demo reels, and website costs.
Agent and Manager Fees: Those 10-15% commissions? Totally deductible.
Wardrobe and Makeup: If it’s used exclusively for auditions or roles, it counts!

Action Step: Keep a detailed log of all expenses, including receipts and invoices. Trust me, future you will be grateful.

Step 4: The Coogan Account—Your Child’s Financial Safety Net

If you’re in a state like California, you’ve probably heard of the Coogan Law. Named after child actor Jackie Coogan (yep, Uncle Fester from *The Addams Family*), this law requires 15% of your child’s earnings to be set aside in a blocked trust account until they turn 18. Think of it as a forced savings plan—because let’s be real, kids aren’t exactly known for their financial planning skills.

Action Step: Open a Coogan account if you haven’t already. Confirm with your child’s employer that they’re depositing the required percentage.

Step 5: Plan for the Future—Because Tomorrow’s Another Show

Once taxes are taken care of, what’s the smartest way to save and invest your child’s earnings? Here are a few options:

1. Roth IRA for Kids

If your child has earned income, they can contribute to a Roth IRA, where their money grows tax-free until retirement.

2. 529 College Savings Plan

A 529 plan allows you to save for future education expenses tax-free.

3. Custodial Brokerage Accounts

Want to invest their earnings in stocks? A UGMA/UTMA account lets parents manage investments until the child turns 18 or 21.

Action Step: Meet with a financial advisor to create a plan that balances your child’s current needs with their future goals.

Frequently Asked Questions (FAQ)

Q: Does my child need to file taxes if they only did one commercial?

A: Yes, if your child earned more than the standard deduction ($13,850 for 2023), they must file a tax return.

Q: Can I deduct the cost of my child’s headshots?

A: Absolutely! Headshots and other marketing materials are considered business expenses and can be deducted.

Q: What happens if I don’t set up a Coogan account?

A: In states with Coogan laws, failing to set up a Coogan account can result in penalties. Always ensure compliance to protect your child’s earnings.

Q: Can I manage my child’s taxes myself, or should I hire a professional?

A: While it’s possible to DIY, hiring a tax pro who specializes in entertainment industry taxes can save you time, money, and headaches.

You’re doing an incredible job balancing your child’s career with their well-being. Taxes might seem like a daunting script, but with the right tools and guidance, you’ve got this. By staying organized, taking advantage of write-offs, and planning for the future, you can ensure your child’s hard-earned money is protected and put to good use.

Disclaimer: This article is for informational purposes only and should not be considered legal or financial advice. Always consult a qualified professional for guidance specific to your situation.

Tax Guide for Parents of Child Actors: Navigating Taxes Without Losing Your Marbles