4 Steps to Teach Your Kids About Taxes with the “Candy Tax”

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Who doesn’t love trick-or-treating? In my heyday, I would head out into the Halloween night dressed as a ninja, a power ranger, or whatever I thought would help me rake in as much candy as possible. My brother and I used pillowcases––not those amateur plastic pumpkins or little bags––to collect our candy, and we usually filled up quite a decent amount.

As soon as I’d gotten home, I’d dump my candy on the floor and immediately begin organizing them by candy type and separating them into two categories: my favorites and those I’m willing to trade (who would have thought I’d become an accountant, right?).

After a successful night, I’d pack it all up and dip into my stash over the next few weeks. Parents, this is where you come in.

Take this opportunity to teach your kids a little bit about taxes and finance by imposing a “candy tax”. After all, it is Halloween, and what’s scarier than taxes?

Step 1: Lay the candy out

Call your kids to the table and lay each of their respective piles of candy out in front of them. Let them look over their piles and admire the fruits (or, at least, fruit-flavored candies) of their labor.

Step 2: Draw a comparison between the candy and money

Liken the candy to hard-earned money; explain that instead of receiving cash, they were compensated for their one or two grueling hours of trick-or-treating with candy.

Step 3: Explain what taxes are and what they’re used for

If your kids aren’t already bored by this point, kudos to you for keeping it interesting, but this step will really test your abilities. Explain that the candy they received is income (for these purposes) and that income is taxed, meaning that a portion of their earnings has to be either withheld up front or paid in separately.

If they ask why, list a few things taxes are used for (if they don’t ask why, pretend they did and tell them anyway):

  • Paving and maintaining roads and other means of travel and transportation
  • Funding public schools
  • Supporting police and firefighters
  • Funding programs that help the needy
  • Funding major health programs
  • Funding our nation’s defense and security

Nicholas Aiola, CPA - 4 Steps to Teach Your Kids About Taxes with the "Candy Tax" - Firefighter Costume

Step 4: Take some candy!

Was this all an elaborate scheme to allow you to steal some of your kids’ candy so you can eat it yourself? Maybe. Maybe not. Either way, now it’s time to take some! Since this is supposed to be a learning opportunity based on fun, I don’t think you have to worry about progressive tax brackets; a flat tax will do just fine here, I’d say.

Explain that you will be taking a percentage of their candy as a tax; that percentage is up to you. Remember, the goal isn’t to make your kids cry (like Jimmy Kimmel), but to teach them a lesson about taxes, so a 50% tax might be a tad counterproductive.

Make sure you take some good pieces, like Reese’s cups, Milky Ways, or whichever ones you your kids like; they have to value the candy they’re giving up, otherwise it’s a moot point. In other words, you can’t take all the black licorice and leave them with the Snickers and Kit Kats; taxes aren’t supposed to be fun to pay!

Tip – If your kids have an uncle named Sam, maybe you can have him take the candy to make it even more realistic (and so you’re not the bad guy).

Nicholas Aiola, CPA - 4 Steps to Teach Your Kids About Taxes with the "Candy Tax" - Trick or Treat

Be consistent

I’m assuming the first year of this experiment probably will not go over so well. It’s important to continue with the “candy tax” year after year in order to ensure that the concept and payment of taxes resonate with your children. Hopefully, this small, consistent exercise will brace your kids for the day when they have to deal with real taxes.

What are your thoughts?

PS – If you try this, we’d love to hear about how it went!

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Aiola CPA, PLLC is a 100% virtual CPA firm, specializing in tax planning and preparation for real estate investors. See more at www.aiolacpa.com


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