Does your business need good workers that you can trust and rely on?  One common approach is to hire your spouse as an official employee of the company.  Although there are a few potential downsides, here are least six tax benefits for taking the plunge and bringing your spouse on board.

1. As long as the tax law requirements are met, your company can deduct the full amount of the contributions to a qualified retirement plan made on behalf of your spouse, within generous limits.

2. If you’re operating a C Corporation, any compensation you pay to your spouse would have stayed with the company.  Assuming your corporation is in a higher tax bracket than your personal tax bracket, you’ll save tax overall if your spouse draws a salary.

3. Your company can arrange to send your spouse “back to school” on either a part-time or full-time basis.  As a general rule, education expenses incurred to improve an employee’s job skills are deductible by the company and tax-free to the employee.

4. Generally, you can’t deduct the travel expenses attributable to your spouse if he or she accompanies you on a business trip.  However, if your spouse is a bona-fide employee and is going for a valid business reason, his or her travel costs -- including air fare, lodging and 50% of meal expenses -- may be deducted.

5. If you’re currently paying more to cover your spouse under your company health insurance plan, hiring your spouse shifts the expense to your company. Typically, your company can deduct the full cost of the health insurance paid for your spouse, just as it can for other employees.  A nice benefit even though the credit for Health Care expenses would be excluded for the spouse.

6. Similar to health insurance, your spouse is entitled to the same group-term life insurance coverage as other employees in the company. The first $50,000 of employer-paid group-term coverage is tax-free to an employee.

Of course, hiring your spouse may have other tax-related repercussions.  We would be glad to discuss the particulars of your situation. Call us at (816) 792-9966 to schedule a meeting.

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