5 tax perks of hiring your spouse

Good news: Business is booming and you're as busy as you ever were. However, if you find yourself short-staffed at work, look no further than across the dinner table.

Strategy: Hire your spouse to help out. In fact, if it makes sense, make your spouse an official company "employee," with all that entails, including filing the required paperwork with the IRS.

Of course, your spouse will owe income and payroll taxes on wages, just like any other new hire, but then your better half becomes eligible for company benefits. Here are five common ways to reap the tax and financial rewards.

1. Salt away funds for retirement

As long as certain requirements are met, an employee-spouse can benefit from contributions made to their account in the company's qualified retirement plan. For instance, if your company has a 401(k), your spouse can elect to defer up to $24,500 in 2026, or $32,500 if they are age 50 or over. Even better: For a spouse age 60 through 63, the total limit for 2026 is $35,750. Plus, the company can add on "matching contributions" up to a stated percentage of compensation.

2. Get more tax mileage per gallon

Generally, you can't deduct travel expenses attributable to a spouse when they accompany you on a business excursion. However, if your spouse is a bona fide employee of the company and is going along for a valid business reason, the travel costs—including airfare, lodging and 50% of the cost of meals—are deductible. The benefit is also tax-free to your spouse.

3. Cure health insurance woes

If you're currently paying more to cover your spouse under the company's health insurance plan, hiring your spouse shifts the expense to the company. The company can deduct the full cost of the health insurance paid for your spouse, just as it can for other employees. And even if you're self-employed, you can still write off 100% of the cost.

4. Further your spouse's education

If your spouse wants to sharpen their business skills, your company can arrange to send them "back to school" part-time. Generally, expenses paid out under an educational assistance plan are deductible by the company and tax-free to the employee, up to $5,250 a year.

5. Join the life insurance group

Similar to health insurance, a business owner's spouse is entitled to the same group-term life insurance coverage as other employees in the company (e.g., equal to three or four times salary). Key point: The first $50,000 of employer-paid group-term life insurance coverage is tax-free to the employee. Also, any additional coverage is taxable at relatively low rates. These perks are particularly advantageous when the business entity is a C corporation.

Tip: Set up a cafeteria plan offering a variety of fringe benefits. As a result, your spouse and employees only take advantage of those benefits they choose.

Give your child a summer job

Your spouse may not be the only family member your company hires this year.

Strategy: Employ your teenaged child during the summer. Both your child and your company can benefit tax-wise. As an employee, your child's earnings may be exempt from tax up to an annual threshold ($16,100 for 2026). As an employer, you can deduct the child's wages. If your child qualifies and claims an exemption on their W-4, they can even avoid current income tax withholding.