Working For Your Spouse – Family Tax Planning

In finance and sport, we find participants that make a lot more money than their spouses (bankers, executives, athletes, doctors, lawyers). Even when a couple files jointly, there can be benefits to splitting income.

If you are an athlete then you might want to hire a coach or agent.

If you are a professional then you might have a separate consulting business that requires the services of an administrator, executive assistant or bookkeeper. This separate business might need it’s own office premises and these premises could be located in your home.

Providing there are real services exchanged, at fair market values, there can be benefits to your family with having your spouse own, and run, a separate services business.

The benefits come from:

  • Improved financial power dynamics within your relationship.
  • The ability to compensate a member of your family, for services that you’d have to hire independently.
  • The ability for a younger, or lower earning, family member to qualify to make their own retirement account contributions. See single-k for more information.
  • A reduced overall tax burden by bringing business expenses (occurred by outsiders) into the family’s allowable deductions. Examples might be travel or professional fees.
  • Improving the credit rating of a family member, thereby saving the family money on it’s overall cost of borrowing.

What’s reasonable will vary on your situation and an experienced tax accountant can guide you on what’s appropriate.