Great Tax Strategy to Employ with Your Wife
September 3rd, 2019 at 9:34 AM
Tax reform changed the rules of the game when choosing your best tax structure.
In looking over the possibilities, we note that a properly structured spousal partnership could be your best choice.
Here are the tax benefits to you:
- Your spouse’s income is free from self-employment tax.
- You and your spouse both still qualify for the new pass-through income deduction under Section 199A.
- The IRS audits partnerships at a much lower rate than proprietorships (Schedule Cs).
- You don’t have to worry about the costs or hassle of running payroll or determining your reasonable compensation as you would if you operated the business as an S corporation.
Here are the potential issues:
- The passive activity rules limit your spouse’s use of any losses against regular income.
- Your cost of preparing a partnership return (but you’d have this cost with an S corporation too).
Mark S. Fineberg, CPA