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Old 01-30-2007, 10:09 AM
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Is it worth putting my spouse on Corporate payroll?

Dear TaxGuru,

I am expecting my income to be steady at about $180,000 w/o taking a salary. I was thinking of taking a salary of $120,000 and splitting the rest with my spouse taking abouth $42,000 and remaining would go to payroll taxes.

Can you please give me your comments on this approach?

Thanks in advance..

PS I saw the downloads on financial modules, hey these are not bad!! Ty.



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Old 01-31-2007, 01:33 AM
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This is a great question!

On the surface, it appears smart to have your wive take a salary. This will enable her to contribute into the social security system with the long term beneficial outcome if you believe, that is, the social security system will be solvent.

I have also heard from loan officers that if both spouses have income it makes for a better credit rating on the couple. I am not 100% certain of this, but this seems to be opinion of some in industry.

The cost of putting your wive on the payroll after you have profits of more than $94,700 would be that she will be paying social security taxes along with medicare taxes, at a combined rate of 7.65% x 2=15.3%.

(Note Social security taxes = 6.2%, Medicare taxes = 1.45%)

Whereas, had you continued taking income after you reached this amount, you would not be subject to Social security taxes of 6.2% and an additional amount matched by your corporation of 6.2%. Hence, you would have saved 12.4% on $42,000.

Medicare taxes have no limits applied to salary, unlike Social Security taxes.

So, you have to decide whether this additional cost of 12.4% x 42,000 = $5,208 offsets the benefits discusses above.

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