Posted on March 11th, 2024

If you own a business and are married, there could be big tax incentives for hiring your spouse to work for you - and even pay them TAX FREE!

You see, hiring your spouse on a part-time basis and giving fringe benefits can be both a tax-deductible expense for your business and also a tax-free source of income for your family. Fringe benefits are forms of compensation you provide to employees outside of a stated wage or salary. Common examples of fringe benefits include medical and dental insurance, use of a company car, and educational assistance.

The key here is to realize that some types of fringe benefits are completely exempt from federal income taxes, Social Security taxes, Medicare taxes, and federal unemployment taxes, making those payments or benefits you provide to your spouse entirely nontaxable. For example, you can contribute payments to a medical reimbursement plan in your spouse’s name, and your spouse could then use the money in that account to buy health insurance for your family without having to pay taxes on the income.

A medical reimbursement plan can make up most or all of the reasonable compensation you’re required to pay to your spouse for their work, so you don’t actually have to pay them any salary or wages - just the tax-free contributions to the plan.

These plan contributions are a salary expense for your business and can be used by your spouse to cover out of pocket medical and dental expenses and insurance premiums without paying tax on the money.

This is a strategy that you can use to shift taxable business income to tax-free personal income for your family. You could save $3,000-10,000 or more in federal and state income taxes each and every year using this strategy.

There are a few words of caution. In order to be allowed by the IRS, the medical reimbursement plan needs to be carefully planned out and documented. But this is definitely something that you should consult with your tax strategist on to see how you might be able to pay your spouse a tax-free income.

Want to see if this strategy could work for you?

Click here to book y our free Strategy Session with me.

I’ll see if hiring your spouse to work in your business could save your family thousands of dollars per year in taxes.

Talk soon,

Bill Gonzalez