What to do with spousal income?

[spotty_dog]

ZZZ wrote:

She can’t think of any better ways to keep herself busy than some trivially low paid job? Unless part time means single digit hours per week, that seems like a pretty bad time for $ trade.

No idea what you make, but she could probably save you more than 10k annually by spending that time learning about personal finance and optimizing your situation.

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Eff you. The OP should work less to offset the spousal income, and THEY should be the one to spend the extra time learning to better manage the finances if that's what matters to them. You don't get to just tell your spouse that they have to be the financial advisor just because you're the fancy dawkter and your income means you get to call all the shots.

Signed, the nonworking spouse who's a decently good financial advisor but would sure as (expletive deleted by mod - let’s sub SHIP) take a low-paying job if it fit my passions better and still suited our family.

"Keep her busy." "Tax hit." Faaaahhhh. >

[HikingDO]

If she’s truly doing it for her enjoyment, then donate it all to charity. Zero tax hit.

[ZZZ]

spotty_dog wrote:

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Eff you. The OP should work less to offset the spousal income, and THEY should be the one to spend the extra time learning to better manage the finances if that’s what matters to them. You don’t get to just tell your spouse that they have to be the financial advisor just because you’re the fancy dawkter and your income means you get to call all the shots.

Signed, the nonworking spouse who’s a decently good financial advisor but would sure as ************************ take a low-paying job if it fit my passions better and still suited our family.

“Keep her busy.” “Tax hit.” Faaaahhhh. >

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Show your math.

Looks like the OP earns around $300/hr (told us 35% bracket), while spouse earns $10-20ish. I mean, I guess your solution to avoiding additional tax is for the high earner to work one less week (40 hours = approx. 12k) so the low earning spouse can work part time all year (op didn't give specific #s, so we'll guess $20/hr means 600 hours or around 15 hours per week 40 weeks per year to earn that same $12k). Trading 600 hours of work for 40 hours of work doesn't strike me as a great deal...

Comparative advantage is real. If I can accomplish 'important family task X' in 1 hour per week, but it takes my spouse 15 hours to accomplish the same, which of us should undertake task X?

Nobody is stopping her from pursuing that part time job about which she's passionate. They're more than welcome to make that choice. There's more to life than dollars and cents. But the OP asked about the tax implications. They are what they are, and it seems reasonable to understand them before making a choice. Regardless of her level of passion, with no tax deferral options available, she'll only keep around half of the first dollar she earns (35% marginal federal + 7.65% FICA + whatever their state tax rate is). If it's still worth it for her to do that, great!

[Panscan]

Show us where the math man hurt you. Realities of math are in fact realities. A spouse working for 10k when primary earner is high income is pretty pointless. Not going to get any benefits or have significant retirement contribution

If anything I feel that people who express outrage over this basic math question are being disrespectful towards stay at home spouses and the value they represent, which is certainly more than 10k /yr. It's ironic you are outraged when your position is the disrespectful one.

[Tyche]

Suggesting the lower earning spouse's contribution is so low she shouldn't even work is offensive. Clearly they don't need the income. OP didn't ask "Should she go back to work because of the tax implication?" (S)he was trying to find out if there were ways to avoid the tax hit. Which, this is a financial forum, so the polite response would have been "only if she has access to a tax deferred space or has self employed income." I have never heard of a physician taking a lower paying job to avoid taxes. So what does it matter if it's her versus him? The results are the same. Except they have $10-15k pre tax income in their pockets and the high earner doesn't have to work more hours!

 

 

[Tim]

“Show your math.”?
I have never observed success with that approach when it comes to life choices. Actually, it can create even poorer choices. Nothing wrong with putting numbers out there for the “person” making the choice, they might change their mind and thank you. Maybe not.
I do know folks that run a “losing business “ that is really a delayed goal lifetime dream. So what? Numbers do lie, it’s a cost of living. Taxes, savings, then “math” falls apart.

[zback]

Thanks guys, didn’t mean to stir the pot. I learned long ago, happy wife, happy life.

[Tim]

“Trading 600 hours of work for 40 hours of work doesn’t strike me as a great deal…”

Don’t think this is shopping for a deal. I think someone said “Here is what I have decided to do. Thank you for your support.”
OK, $15 k. I sure wish we could just keep it. Gimme ideas for at least minimizing taxes.

Hey, she has FIRD’d and chooses a side hustle. It’s purely a tax question.

[Panscan]

It's not offensive unless you're hyper sensitive. It's math and understanding how taxes work. You're literally probably losing money on the 10k spouse earner when you consider taxes, job expenses such as transportation and clothes.

I think it's offensive to imply the only way someone can add value to family is by going to work. We're not saying the spouse is useless, just that working isn't the best use of their time

[Larry Ragman]

Panscan wrote:

It’s not offensive unless you’re hyper sensitive. It’s math and understanding how taxes work. You’re literally probably losing money on the 10k spouse earner when you consider taxes, job expenses such as transportation and clothes.

I think it’s offensive to imply the only way someone can add value to family is by going to work. We’re not saying the spouse is useless, just that working isn’t the best use of their time

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I think you and ZZZ are missing the point. Of course one of the spouses can add great value staying home, but that doesn’t mean he or she wants to stay there exclusively. If the spouse in OP’s case, or my own wife for that matter, wants to work part time in a professional capacity, then who are any of us to say that is not the best use of his or her time? Math and taxes notwithstanding, there is a certain satisfaction in work, and a certain relief in getting out of the house for a while. I think OP understood this implicitly and was simply asking how to turn the situation to its best financial outcome. With no work tax advantaged savings the financial options aren’t great, but not all of life’s choices are amenable to financial calculation.

[Panscan]

Larry Ragman wrote:

Panscan wrote:

It’s not offensive unless you’re hyper sensitive. It’s math and understanding how taxes work. You’re literally probably losing money on the 10k spouse earner when you consider taxes, job expenses such as transportation and clothes.

I think it’s offensive to imply the only way someone can add value to family is by going to work. We’re not saying the spouse is useless, just that working isn’t the best use of their time

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I think you and ZZZ are missing the point. Of course one of the spouses can add great value staying home, but that doesn’t mean he or she wants to stay there exclusively. If the spouse in OP’s case, or my own wife for that matter, wants to work part time in a professional capacity, then who are any of us to say that is not the best use of his or her time? Math and taxes notwithstanding, there is a certain satisfaction in work, and a certain relief in getting out of the house for a while. I think OP understood this implicitly and was simply asking how to turn the situation to its best financial outcome. With no work tax advantaged savings the financial options aren’t great, but not all of life’s choices are amenable to financial calculation.

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thats fair. I just think people are quick to jump on others for saying the math isn't great, which is a pretty neutral statement in my opinion and in no way condescending towards the spouse

[Glidewire]

If her job doesn't offer a 401K or a retirement account, can you open a solo 401(k) for her? If so, you probably can put 85-90% of this extra money tax free.

https://www.bankrate.com/calculators/retirement/self-employed-401-k-calculator.aspx

In terms of keeping your spouse happy, you should let her spend the extra money however she would like. However, if you've already maxed out all of your retirement accounts and have extra that you're contributing to a taxable account, it can be an opportunity for you to expand your tax advantaged investing space.

 

 

[spotty_dog]

ZZZ wrote:

spotty_dog wrote:

Click to expand…

Eff you. The OP should work less to offset the spousal income, and THEY should be the one to spend the extra time learning to better manage the finances if that’s what matters to them. You don’t get to just tell your spouse that they have to be the financial advisor just because you’re the fancy dawkter and your income means you get to call all the shots.

Signed, the nonworking spouse who’s a decently good financial advisor but would sure as ************************ take a low-paying job if it fit my passions better and still suited our family.

“Keep her busy.” “Tax hit.” Faaaahhhh. >

Click to expand…

Show your math.

Looks like the OP earns around $300/hr (told us 35% bracket), while spouse earns $10-20ish. I mean, I guess your solution to avoiding additional tax is for the high earner to work one less week (40 hours = approx. 12k) so the low earning spouse can work part time all year (op didn’t give specific #s, so we’ll guess $20/hr means 600 hours or around 15 hours per week 40 weeks per year to earn that same $12k). Trading 600 hours of work for 40 hours of work doesn’t strike me as a great deal…

Comparative advantage is real. If I can accomplish ‘important family task X’ in 1 hour per week, but it takes my spouse 15 hours to accomplish the same, which of us should undertake task X?

Nobody is stopping her from pursuing that part time job about which she’s passionate. They’re more than welcome to make that choice. There’s more to life than dollars and cents. But the OP asked about the tax implications. They are what they are, and it seems reasonable to understand them before making a choice. Regardless of her level of passion, with no tax deferral options available, she’ll only keep around half of the first dollar she earns (35% marginal federal + 7.65% FICA + whatever their state tax rate is). If it’s still worth it for her to do that, great!

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Whatever dude. My spouse earns significantly more than $300/hr and we're not even close to the 35% bracket, so you go ahead and show ME the math. But that's completely and totally beside the point. At this income level, we literally tear our hair out EVERY. SINGLE. MONTH because after we pay for the mortgage, household expenses, tax-preferred retirement...we are left holding an amount equal to the amount I last earned in a full YEAR. And supported us both. Comfortably.

And it's still completely irrelevant. If a spouse wants to work "to keep her busy" *ptui* then she's GOING to effing WORK. There is NO income level at which this is NOT a net positive for the household. Taxes are what they are, they are assessed on the HOUSEHOLD. If you want the HOUSEHOLD income to go down for less tax exposure, and the spouse wants to work, then I don't understand why there is even a question. The primary earner can find a way to EARN LESS MONEY. Or you just deal with the fact that high-income households pay taxes. Criminy.

Currently I spend about 20 hours a week on volunteer work, and more than full-time on household maintenance and child care, and that's what works for me and for our household. Spouse would rather I got health benefits, but isn't interested in trading an inflexible schedule for said benefits, so is neutral on this matter. If I found paid work that gave me the same satisfaction as my volunteer work, and an income besides to offset this bullshit Handmaid's Tale "women don't hold money" dystopia I sometimes find myself in, you could take that job off my dead body, and you could find yourself missing a limb if you tried to "tax implications" me out of it.

This forum has gotten so freaking misogynistic in the past few years.

[Lithium]

I guess I understand why in a semi-recent thread, the OP somewhat confusingly went out of his way to refer to his spouse as "they." It's really a shame that this thread is probably going to get locked because of gender dynamics issues that I don't think are germane to the financial question. Of course, from a tax standpoint, whether the spouse is a man or woman makes zero difference.

[spotty_dog]

Lithium wrote:

I guess I understand why in a semi-recent thread, the OP somewhat confusingly went out of his way to refer to his spouse as “they.” It’s really a shame that this thread is probably going to get locked because of gender dynamics issues that I don’t think are germane to the financial question. Of course, from a tax standpoint, whether the spouse is a man or woman makes zero difference.

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LOL. If the spouse in question were male, with either a male or a female dawkter spouse, it would still smack me as misogynistic to characterize the non-dawkter's paid work as less subject to the consideration of "do they want to do it and is it worth it to them" than the dawkter's. Some things cross gender lines. And if this is the kind of thing that gets threads locked these days, my observation about the forum holds.

(Signed, Girl who did not hold with "modern feminists" as a youngster, but who's getting feisty near her 40s.)