The Tax Advantages of Hiring Your Spouse (Bookkeeping & Payroll Strategy for Service-Based Businesses)

Paul Belshaw
Aug 17
2 min read

For many service-based business owners, running your company is already a family effort. If your spouse helps answer calls, handle scheduling, or even manage your books, you may be missing out on a valuable tax and bookkeeping opportunity: legally hiring your spouse.

Done correctly, this strategy strengthens your bookkeeping records, reduces your tax bill, and opens up retirement and health benefits for your household. Here’s how to do it the right way.

Why Hiring Your Spouse is a Smart Business Move

Lower Your Taxable IncomeWhen your spouse is officially on payroll, their wages become a deductible expense—reducing your taxable income.
Retirement Savings OpportunitiesAs an employee, your spouse can participate in retirement plans like a SIMPLE IRA or 401(k), giving your family more ways to save with tax advantages.
Health Insurance BenefitsHiring your spouse may allow you to deduct their health insurance coverage through your business.
Cleaner Bookkeeping & Advisory PlanningPayroll for your spouse creates stronger, more accurate bookkeeping records—essential if you want clear financials for tax planning or business growth.

IRS Rules & Documentation You Must Follow

Legitimate Work: Your spouse must perform actual business services (bookkeeping, client calls, invoicing, admin support).
Fair Compensation: Pay must be reasonable for the tasks performed.
Payroll Records: W-2s, withholdings, and timesheets must be maintained.

Proper bookkeeping keeps you compliant and protects your business in case of an IRS audit.

Local Example: Plumbing Company in Holiday, FL

Let’s say you run a Holiday plumbing service. Your spouse handles scheduling, enters expenses into QuickBooks, and issues invoices. Instead of outsourcing this work, you pay them a wage:

That salary becomes a deductible business expense.
They can contribute to a retirement plan.
Your bookkeeping now reflects legitimate payroll expenses.

Business Structure Considerations

Your business structure matters when hiring a spouse:

Sole Proprietorships & LLCs: Flexible options for payroll setup.
S-Corps & C-Corps: Must follow formal payroll requirements, including withholding Social Security, Medicare, and FUTA.

Belshaw Accounting provides advisory services to determine the most tax-efficient structure for your situation.

Key Takeaways for Service-Based Business Owners

Hiring your spouse legally creates tax savings and retirement opportunities.
Bookkeeping and payroll documentation are critical.
Fair pay and real responsibilities are required.
The right business structure maximizes benefits.

Conclusion

When structured properly, hiring your spouse can unlock significant tax savings and long-term financial advantages for service-based businesses.

The key is planning ahead and documenting payroll correctly. With Belshaw Accounting, this strategy is 100% legal, IRS-compliant, and one of the most effective ways to strengthen your bookkeeping and tax planning in 2025.

Call Belshaw Accounting today to discover how this strategy can work for your family business.