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  • Home based business helped physician spouse

    I do marketing work, facebook, direct mail, etc. for my physician spouse. Wondering if it makes sense to step up a home based business and have the practice pay me (and maybe get a couple more customers). Given the tax deductions available, although complicated, seems like it might be a good idea. Anyone have any experience with this?

    Thanks!

     

  • #2


    I do marketing work, facebook, direct mail, etc. for my physician spouse. Wondering if it makes sense to step up a home based business and have the practice pay me (and maybe get a couple more customers). Given the tax deductions available, although complicated, seems like it might be a good idea. Anyone have any experience with this?
    Click to expand...


    Yes, lots. It can be very beneficial if the practice is profitable, i.e. if this is your hubby's main business and not a side start-up or just a bit of IC income. First step, and most important, is for you to set aside space for a dedicated home office. This is not to be done in a guest bedroom. And DO NOT be talked into using the SHOM (Simplified Home Office Method) when calculating your taxes. Please.

    Next step is to determine a fair rate for you to be paid, document your work expectations, and write up a contract. If you are going to do this for others, then you will, indeed, have a separate business. If you are going to do this for your husband only, it could be simpler to be an employee of your husband's business only (presuming he is being paid IC, is this correct?)

    You will want to fund a SOLO-401k, which can be done whether you are an employee of your husband's or an IC.

    I would probably recommend, at least at this stage, forming an LLC if you are an IC. If you are employed by your husband, my advice may change. Obviously, you need to work with a CPA who has expertise in this area.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

    Comment


    • #3
      What's the point of the LLC? I'm not hearing much liability there, at least until there is a client beyond his/her spouse.

      I also don't think setting up a home office is the most important aspect of this. The home office deduction is generally pretty small because most of us aren't willing to dedicate a significant portion of our house exclusively to the side business. I don't take it at all, for instance. There's nothing in the house that only gets used for WCI stuff.

      I think to figure out the most important aspect of this we need to ask him/her what is the point of doing this for him/her. Is it to get a home office deduction? Is it to get her 40 quarters in for Social Security? Is it to have access to a Solo 401(k) for a rollover to allow Backdoor Roths? Is it to get more money into retirement accounts? (If so, are the ones available to the couple now being maxed out?)

      Finally, the most important aspect might be the fact that he/she will now be paying SS taxes the couple wasn't paying before. That is likely to outweigh any home office deduction. Your marginal tax rate is likely higher than your spouse's.

      I would, however, like to hear why the SHOM sucks. I haven't heard that before. I kind of applauded it when it came out for simplifying things, but if it means leaving too much money on the table, maybe it's too simple.
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

      Comment


      • #4


        What’s the point of the LLC? I’m not hearing much liability there, at least until there is a client beyond his/her spouse.

        She gets sued for her business and exposes her assets (joint ownership of house, joint taxable account, etc.). Why not? Cheap and easy.


        I also don’t think setting up a home office is the most important aspect of this. The home office deduction is generally pretty small because most of us aren’t willing to dedicate a significant portion of our house exclusively to the side business. I don’t take it at all, for instance. There’s nothing in the house that only gets used for WCI stuff.

        What applies to you doesn't apply to the rest of the world. Our clients tend to have expensive houses with lots of big rooms available for nice home offices. Not all of them have (5?) kids filling up all of the bedrooms. Sorry you can't find space to run your 7-figure business out of one and deduct a proportionate amount of HO insurance, utilities, R&M, RE taxes, mortgage interest, and depreciation, but it might be worth more than you realize.



        I would, however, like to hear why the SHOM sucks. I haven’t heard that before. I kind of applauded it when it came out for simplifying things, but if it means leaving too much money on the table, maybe it’s too simple.
        Click to expand...


        I guess you didn't read my article. We run every home office deduction both ways and I've only had one come back saving taxes with the SHOM since it came out. But, again, that is because our clients tend to have expensive houses. The SHOM is skewed to screw clients with more expensive houses because it doesn't allow for depreciation. And we run it both ways b/c the IRS will not allow you to go back and amend once you realize what you've given up. Didn't you realize there was a catch?

        You have a point, of course, about the SE taxes, but the OP was talking about taking on more clients. Sounded to me like she was considering legitimate entrepreneurship.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

        Comment


        • #5







          I also don’t think setting up a home office is the most important aspect of this. The home office deduction is generally pretty small because most of us aren’t willing to dedicate a significant portion of our house exclusively to the side business. I don’t take it at all, for instance. There’s nothing in the house that only gets used for WCI stuff.

          What applies to you doesn’t apply to the rest of the world. Our clients tend to have expensive houses with lots of big rooms available for nice home offices. Not all of them have (5?) kids filling up all of the bedrooms. Sorry you can’t find space to run your 7-figure business out of one and deduct a proportionate amount of HO insurance, utilities, R&M, RE taxes, mortgage interest, and depreciation, but it might be worth more than you realize.





          Click to expand...


          I guess the counter argument is that if you have space in your house that you only use for a business that didn't even exist a year ago, that you bought way too much house. There are very few home businesses that can't be run in space used for something else at other times. I'd rather have full use of my house than a minor deduction, part of which is recaptured eventually and part of which might go to someone else to spend time taking care of the paperwork on it.

          I think people really need to run the numbers on this deduction. I mean, if you have a 5000 square foot house and you dedicate a 10x10 room to your office, you're only getting to deduct 1/50th of your home expenses. Even if those expenses are $50K a year (which has gotta be 3-5 times what mine may be) that's a $1000 deduction, so $500 off your taxes. Don't pay an extra $8K in SS taxes to get a $500 deduction.
          Helping those who wear the white coat get a fair shake on Wall Street since 2011

          Comment


          • #6










            I also don’t think setting up a home office is the most important aspect of this. The home office deduction is generally pretty small because most of us aren’t willing to dedicate a significant portion of our house exclusively to the side business. I don’t take it at all, for instance. There’s nothing in the house that only gets used for WCI stuff.

            What applies to you doesn’t apply to the rest of the world. Our clients tend to have expensive houses with lots of big rooms available for nice home offices. Not all of them have (5?) kids filling up all of the bedrooms. Sorry you can’t find space to run your 7-figure business out of one and deduct a proportionate amount of HO insurance, utilities, R&M, RE taxes, mortgage interest, and depreciation, but it might be worth more than you realize.





            Click to expand…


            I guess the counter argument is that if you have space in your house that you only use for a business that didn’t even exist a year ago, that you bought way too much house. There are very few home businesses that can’t be run in space used for something else at other times. I’d rather have full use of my house than a minor deduction, part of which is recaptured eventually and part of which might go to someone else to spend time taking care of the paperwork on it.

            I think people really need to run the numbers on this deduction. I mean, if you have a 5000 square foot house and you dedicate a 10×10 room to your office, you’re only getting to deduct 1/50th of your home expenses. Even if those expenses are $50K a year (which has gotta be 3-5 times what mine may be) that’s a $1000 deduction, so $500 off your taxes. Don’t pay an extra $8K in SS taxes to get a $500 deduction.
            Click to expand...


            LOL, i meant to hit quote and I hit like, but I do like your tenacity. You are great at boiling down the complex to simple syrup, but I'm talking about $3k - $4k deductions annually, not $1k. And you turned a $1000 deduction into a $500 deduction. What's next? Not to mention ignoring my statement that the OP was talking about starting a business. You're telling the OP NOT TO START A BUSINESS AND MAKE MONEY so she won't pay any SS taxes. HUH?

            Actually, I've known many people who bought a house with an extra room or even 2 and didn't fill it for a few years and didn't consider themselves to have bought way too much house. Maybe planning ahead for in-laws, for another child, for a man-cave, or something else. Seriously, you've never thought ahead like that? You just move in and fill up all the space, wham bam?
            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

            Comment


            • #7
              A $1000 deduction, for someone with a 50% marginal tax rate, means $500 off their taxes.

              The OP may or may not be REALLY starting a business. In reality he/she is helping his/her spouse with their business. The amount of income is likely the same for the couple no matter who makes it, but if the wrong person makes it the tax bill is higher. Now if he/she decides to do this for someone else's practice, then sure, there's additional income for the couple.

              I'm not saying NOBODY has any room in their house that they can dedicate to doing nothing with but Facebooking and direct mail, but when most people really think about it, they'll realize that's a job that can be done from the recliner in the family room. The whole "home office" is just a tax scheme.

              The reality is that most people use that space for both their business and whatever else they want, then lie to the IRS in order to save on taxes. I figure if you're going to lie to the IRS, might as well lie big and I can think of a lot more profitable lies than a home office deduction.

              But hey, run the numbers yourself and if you figure you can get yourself a $4K deduction, I'm all for it. Just remember the rule- regular and exclusive use of the space for the business. And make sure you're not paying $8K in SS taxes to get a $1K deduction which is what I suspect may be going on here.

              And why are you assuming the OP is a she? Sexist!
              Helping those who wear the white coat get a fair shake on Wall Street since 2011

              Comment


              • #8
                I hate when Mom and Dad fight...

                Comment


                • #9
                  This would make a good pro/con post if one doesn't already exist.

                  Comment


                  • #10




                    I hate when Mom and Dad fight…
                    Click to expand...


                    :lol:

                    Comment


                    • #11


                      And why are you assuming the OP is a she? Sexist!
                      Click to expand...


                      Guilty as charged. Would love to know if my intuition is correct and I'll happily eat humble pie if I'm wrong.


                      that’s a $1000 deduction, so $500 off your taxes. Don’t pay an extra $8K in SS taxes to get a $500 deduction.
                      Click to expand...


                      Make up your mind. Is it a $1k deduction or a $500 deduction? But we are getting a bit petty. Sorry about that.
                      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                      Comment


                      • #12
                        I doubt your intuition is wrong. I'm mostly just making fun of how often I'm called out by readers for being sexist for doing something similar. Maybe domodomo will return to the thread and let us know.

                        If you read carefully, I'm pretty sure I never said "$500 deduction." Here's the direct quote:
                        Even if those expenses are $50K a year (which has gotta be 3-5 times what mine may be) that’s a $1000 deduction, so $500 off your taxes.
                        Helping those who wear the white coat get a fair shake on Wall Street since 2011

                        Comment


                        • #13




                          I doubt your intuition is wrong. I’m mostly just making fun of how often I’m called out by readers for being sexist for doing something similar. Maybe domodomo will return to the thread and let us know.

                          If you read carefully, I’m pretty sure I never said “$500 deduction.” Here’s the direct quote:
                          Even if those expenses are $50K a year (which has gotta be 3-5 times what mine may be) that’s a $1000 deduction, so $500 off your taxes.

                          Click to expand...


                          I'm not denying I don't get by with a few things that you don't, but it works both ways.

                          What do you mean, if I read carefully?


                          that’s a $1000 deduction, so $500 off your taxes. Don’t pay an extra $8K in SS taxes to get a $500 deduction.

                          Why don't you just go back and edit your post and take it out? Then I wouldn't have to read so carefully. It's making my eyes hurt.
                          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                          Comment


                          • #14







                            I doubt your intuition is wrong. I’m mostly just making fun of how often I’m called out by readers for being sexist for doing something similar. Maybe domodomo will return to the thread and let us know.

                            If you read carefully, I’m pretty sure I never said “$500 deduction.” Here’s the direct quote:
                            Even if those expenses are $50K a year (which has gotta be 3-5 times what mine may be) that’s a $1000 deduction, so $500 off your taxes.

                            Click to expand…


                            I’m not denying I don’t get by with a few things that you don’t, but it works both ways.

                            What do you mean, if I read carefully?


                            that’s a $1000 deduction, so $500 off your taxes. Don’t pay an extra $8K in SS taxes to get a $500 deduction.

                            Why don’t you just go back and edit your post and take it out? Then I wouldn’t have to read so carefully. It’s making my eyes hurt.
                            Click to expand...


                            Burned. You got me. I could not for the life of me figure out what you were referring to.
                            Helping those who wear the white coat get a fair shake on Wall Street since 2011

                            Comment


                            • #15




                              A $1000 deduction, for someone with a 50% marginal tax rate, means $500 off their taxes.

                              The OP may or may not be REALLY starting a business. In reality he/she is helping his/her spouse with their business. The amount of income is likely the same for the couple no matter who makes it, but if the wrong person makes it the tax bill is higher. Now if he/she decides to do this for someone else’s practice, then sure, there’s additional income for the couple.

                              I’m not saying NOBODY has any room in their house that they can dedicate to doing nothing with but Facebooking and direct mail, but when most people really think about it, they’ll realize that’s a job that can be done from the recliner in the family room. The whole “home office” is just a tax scheme.

                              The reality is that most people use that space for both their business and whatever else they want, then lie to the IRS in order to save on taxes. I figure if you’re going to lie to the IRS, might as well lie big and I can think of a lot more profitable lies than a home office deduction.

                              But hey, run the numbers yourself and if you figure you can get yourself a $4K deduction, I’m all for it. Just remember the rule- regular and exclusive use of the space for the business. And make sure you’re not paying $8K in SS taxes to get a $1K deduction which is what I suspect may be going on here.

                              And why are you assuming the OP is a she? Sexist! ?
                              Click to expand...


                              Why would one be paying $8000 in SS taxes in this scenario?

                              Comment

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