Can I Deduct My Spouse's Wages if They Work for My Business?

Yes — if your spouse performs real work for your business, you can deduct their wages as a legitimate business expense. Unlike hiring your minor children in a sole proprietorship, wages paid to a spouse are fully subject to Social Security and Medicare taxes. One strategy: hiring your spouse can allow you to provide a Health Reimbursement Arrangement (HRA), which lets the business pay your family's medical expenses tax-free. The wages must reflect fair market value for the work performed and should be documented. Keep records of hours worked and duties performed to demonstrate the legitimacy of the arrangement.