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Reduce Your Taxes by Making Your Spouse a Business Partner

July 3, 2018

Tax reform changed the rules of the game when choosing your best tax structure. In looking over the possibilities, a properly structured spousal partnership could be your best choice.

Here are the tax benefits to you:

• Your spouse’s income is free from self-employment tax.

• You and your spouse both still qualify for the new pass-through income deduction under Section 199A.

• The IRS audits partnerships at a much lower rate than proprietorships (Schedule Cs).

• You don’t have to worry about the costs or hassle of running payroll or determining your reasonable compensation as you would if you operated the business as an S corporation.
Here are the potential issues:

• The passive activity rules limit your spouse’s use of any losses against regular income.

• You have the cost of preparing a partnership return (but you’d have this cost with an S corporation too).

If you would like to discuss how your choice of business entity works in today’s tax environment, please don’t hesitate to contact us.

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