Updated: Feb 1
In these tight employee availability times we are in, one way to get some help might be hiring your spouse. Of course, that assumes you haven’t already done that. Now I need to put a disclaimer in here. If working closely with your spouse will put a strain on your marriage, then PLEASE, do NOT hire your spouse. But if you have a strong marriage and working closely might even strengthen it more, then the following advice is for you.
By making your spouse an official company employee, you open yourself up to a world of additional benefits.
One of the best is socking away even more money into your company retirement plan. Hopefully, you have a company retirement plan. If you do not have a company retirement plan, then we need to talk about getting you setup ASAP on that. Now your spouse can contribute up to 100% of their salary (with some upper limits of $19,500 in 2021 or $26,000 if your spouse is age 50 or over).
Another benefit of having your spouse as a bonafide employee of your business is getting to deduct additional travel expenses. Normally, when you travel and take your NON-employee spouse along, that portion attributable to the NON-employee spouse is NOT a deductible company expense. Now, when you and your spouse travel together, assuming you can justify the additional related travel costs, they now become a tax-deductible item. That includes airfare, lodging and, for 2021 only, 100% of meals.
If you are currently using a company provided health insurance arrangement, with a NON-employee spouse, the related premiums are NOT a deductible company expense. By having your spouse on the books as an employee, now their share of health insurance premiums could be a company deductible expense. (As long as you are paying for other employees’ health insurance too. Makes it simple if you and your spouse are the only employees.)
Add on top of that, if your company has group term life insurance coverage, now your spouse can get up to $50,000 coverage, premiums paid by the company and fully deductible. Non-taxable to you and your spouse. (If your business is a C Corporation. May be taxable if you have a Sub-S.)
If you consider your spouse as part of “management” then you can take them out to a dinner or lunch, discuss business matters, and get to fully deduct the meal as a business expense. Make sure you really discuss business matters.
Did you hear? Prov 14:23a says, “In all hard work there is profit…”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.