It’s hard to find trustworthy and reliable employees these days. But you may not have to look farther than your bed to lure a great employee. Hiring your spouse as an official employee in your business can not only help solve your staffing problems but it can also provide some tax benefits for your business.
What tax benefits can you take advantage of by putting your spouse on the payroll?
1. Increased Tax Deductions For Contributions to Retirement Plans
Your company can deduct the full amount of the contributions to a qualified retirement plan made on behalf of your spouse. So, if your company provides a defined contribution plan to employees, it can deduct contributions up to the lesser of 25% of compensation or $50,000. If your company has a 401K plan, then you can defer tax on up to $17,000 of your spouses’ income. Plus, your company can also take a deduction for any matching contributions to the plan.
2. Reduce Your Company’s Taxable Income
If you’re operating a C corporation, any compensation paid to your spouse is tax deductible to the company. When your corporate tax bracket is higher than your personal tax bracket, this strategy helps to shift taxable income from your corporation.
3. Get a Tax Write Off For Your Spouses Education Expenses
Your company can arrange to send your spouse “back to school”. Education expenses incurred to improve an employee’s job skills are deductible by the company and tax-free to the employee.
4. Write Off More Business Travel
While its tough to deduct the travel expenses related to your non-employee spouse, if your spouse is a company employee and is going for a valid business reason, then his or her travel costs are deductible to your company and tax-free to your spouse.
5. Deduct Health Insurance Premiums
If you’re currently paying out of pocket to cover your spouse under the company health insurance plan, then hiring your spouse shifts the expense to the company. Now your company can deduct the full cost of your spouses’ health insurance premiums.
6. Take A Tax Deduction For Life Insurance
As an employee, your spouse is entitled to the same group-term life insurance coverage as your other employees. If you operate as a C corporation, then you can provide the first $50,000 of employer-paid group-term life insurance coverage tax-free to your spouse while also taking a deduction for the premiums paid.