Paying a Spouse

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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Bacchus01
Posts: 1936
Joined: Mon Dec 24, 2012 9:35 pm

Paying a Spouse

Post by Bacchus01 » Mon Aug 20, 2018 6:02 pm

We own several properties. For simplicity, I’ll focus on two. One generates income (albeit at a net loss when depreciation is taken into account) and one is a speculative piece of land that generates no income. Today we can deduct some of the taxes, but that’s about it.

If I hired my wife to manage those properties, we would incur a further loss. But, she could put all of her earnings into a Solo 401k. Thus pay her $18.5K to manage the properties. She puts 100% into 401k. We generate a business loss on our joint return. We pay 15% employment tax on her income, but then offset that with a reduction on combined income of 32% at the marginal rate.

Forgoing the problem of requiring profit 3 out of 5 years, is this possible?

pascal
Posts: 121
Joined: Sun Jun 19, 2016 5:05 pm

Re: Paying a Spouse

Post by pascal » Mon Aug 20, 2018 6:24 pm

"Never underestimate the ability of a bad situation to get worse...rapidly." Ninegrams

Bacchus01
Posts: 1936
Joined: Mon Dec 24, 2012 9:35 pm

Re: Paying a Spouse

Post by Bacchus01 » Mon Aug 20, 2018 8:40 pm

Thanks, but that doesn't really answer the question. It implies that it's not in an LLC, which it would be, and implies that it's moving income from one bucket to another (it's not). Being "not a good idea" doesn't make it legal or illegal.

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