Married Couples in Business Reduce Your Taxes

6/19/2018

Tax Reform has taxpayers scrambling for strategies to lower their tax liability. A spousal business partnership may be one solution.

Key Tax Benefits:

Your spouse’s income isn't subject to self-employment tax.

You two won't lose the benefit of the new pass-through income deduction under Section 199A.

The IRS percentage of audits of an partnerships is less than proprietorships (Schedule Cs).

You don’t have to concern yourself with running payroll or determining your reasonable compensation as you would if you operated the business as an S corporation.

The passive activity rules limit your spouse’s use of any losses against regular income. Which may be the only potential issue besides having an increase in tax preparation cost.

It is crucial to understand that a partnership doesn't mean your spouse work for you. If you set up your structure where your spouse works for you then you must pay Social Security and Medicare taxes for your spouse. The wages for the services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding and Social Security and Medicare taxes, but not to FUTA tax.

If you would like to discuss how your choice of business entity works in today’s tax environment, please don’t hesitate to contact us.

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Important Disclosures

Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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Author

Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.

Keana founded this website and decided and created this blog page to offer a space for those seeking knowledge to understand, however not to be confused with advice or planning strategies.

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