Hire your partner in life: putting your spouse on payroll

Who this is for

• A spouse doing real, ongoing work for the business at a reasonable wage.
• Payroll taxes: a spouse working in the other spouse’s business has income tax withholding plus Social Security and Medicare. There’s no general FICA break for spouses the way there is for kids.¹
• One FUTA break: when one spouse employs the other in a sole proprietorship, those wages aren’t subject to FUTA. In a corporation, regular FUTA applies.
• Co-owners instead? A married couple who jointly own and run an unincorporated business (not an LLC or other state-law entity), file jointly, and both materially participate can elect qualified joint venture (QJV) status. Each spouse files their own Schedule C and SE, and both get Social Security credit.²

The 2026 numbers

• Social Security wage base: $184,500; employee FICA 7.65%.
• 401(k) elective deferral limit: $24,500. Catch-up at age 50+: $8,000. Ages 60–63: $11,250.³
• An owner-only ("solo") 401(k) can cover the owner and spouse.⁴

How to do it right

1. Define the role. Write a job description (bookkeeping, scheduling, sales, operations) and expected hours.
2. Set reasonable pay. Match what you’d pay someone else for that role. Save your comps.
3. Run real payroll. Form W-4, Form I-9, regular paychecks to your spouse’s own account, a W-2 at year-end.
4. Track time. Simple timesheets or a calendar log.
5. Plug into retirement. With W-2 pay, your spouse can make their own elective deferrals in the business plan. See our Solo 401(k) guide.
6. Map out benefits. Benefits the business offers can often extend to an employee-spouse. Spouses of more-than-2% S-corp shareholders are generally treated like owners for many fringe benefits, so sort this one out with your CPA.
7. Going the QJV route? You elect it by filing a joint Form 1040 with separate Schedules C and SE for each spouse.

Run it by your CPA

Your CPA can confirm the best setup for your entity: employee spouse, co-owner, or QJV.

Every business is a little different, so check with your CPA for your situation. Good CPAs are on your team, and they love an owner who shows up with the homework done.

More from Dad’s tax playbook

• When the S-corp election pays off: Payroll tax saved minus the cost of running an S corp. The two-column math and Form 2553 timing.
• Put your kids on payroll: By business type: when kids’ pay skips FICA, their standard deduction, and the Roth IRA angle.
• S-corp owner health insurance: W-2 Box 1 only, then Form 7206. One payroll setting, one form.
• The accountable plan: Get paid back for miles, phone and home office without it counting as wages.
• The Augusta rule: Rent your home to your company for real meetings, fewer than 15 days a year.
• The Solo 401(k): Two hats, two contributions: 2026 limits, deadlines and the S-corp angle.
• Work Opportunity Tax Credit: watch this space: Lapsed for 2026 hires so far. Where it stands, and the playbook if Congress revives it.
• PTET: let your business pay the state tax: How pass-through entity tax elections work around the personal SALT cap.
• Dial in your W-4: Step 2(c), Step 3 and Step 4(c) for owners, spouses and kids on payroll.
• S-corp reasonable salary by profession: pay ranges for 15 professions, the IRS factors and a one-page salary memo.

Payroll Dad is a cartoon run by a real small family business. This is general education, not tax advice for your situation.