Tax Tip of the Week – Hiring My Other Half Can Save Me in Taxes? How?

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0319_office-husband-wife_390x220 If you’re a business owner, you know how much you rely on your family’s support. Your spouse probably already is helping you in your business. Actually, putting them officially on the company’s payroll has many advantages. 

1.    If your spouse was previously unemployed and qualifies for the HIRE Act (Refer to previous Tax Tip of the Week), you can take advantage of these tax breaks. It’s clear that this tax break is available for sole proprietors, partnerships and limited liability companies (LLCs). But, it’s not as clear-cut when a 50%-or-more owner of a C corporation or S corporation hires a spouse. Additional guidance from the IRS is expected.

2.     You can deduct the full amount of contributions to a qualified retirement plan made for your spouse. Of course, you still need to follow the laws and guidelines; but, this is a great way to lower your taxes and save for retirement.

3.    If a business owner is operating a C corporation, payments to the spouse can reduce taxes if the company is in a higher tax bracket than the owner’s tax bracket. Also, this allows you to take more funds out of the corporation before the company is hit with the excess earnings tax or has to pay dividends, which results in the feared double taxation of income.

4.    If your spouse is considering going back to school for a business degree or something that can benefit your business, the business can pay for it and making the tuition tax deductable. You cannot take any education credits if you were to do this; but, you will not be taxed on the money you spend on tuition.

5.    Health insurance is another area where hiring your spouse can cut costs. As we all know, health coverage is expensive and, if you hire your spouse you can get the same coverage and price that your other employees receive. The difference being that it's have it be 100% deductable.

6.    If you and your spouse travel a lot for business, you can take the mileage and your spouse’s expenses. If your spouse is an actual employee and will be performing work related duties during the trip, expenses can be deducted as normal business expenses.

7.    Again, if you offer your employees life-insurance at group rates, your spouse can include you in their plan.

These are just some benefits that you can receive if you are considering employing your spouse. You may want to call us and your insurance representative to make sure the savings are worth the payroll tax expenses.