Co-Owner Spouses Tax Tip

Tax tip for Sole Proprietors When You Work With Your Spouse


When two or more people own an unincorporated business, it is generally classified as a partnership. This is true even for an unincorporated business co-owned by a married couple.

However, for tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a qualified joint venture (QJV) whose only members are a husband and wife filing a joint return, can elect not to be treated as a partnership for federal tax purposes and can be treated as a disregarded entity. In other words, the business can be treated as a sole proprietorship instead of a partnership.

Co-owner spouses can elect to file 2 Schedule C or Schedule F forms and Schedule SE each year.  Each spouse reports their share of the business profits or losses on their Schedule C.  Both spouses must work in the business.  According to the IRS, a married couple can file for a qualified joint venture if they both materially participate in the business, the husband and wife are the only owners and both elect to not file as a partnership.

Benefit – By filing 2 Schedule C forms each spouse receive Social Security and Medicare credits for their earnings.

For example, if the business has $100,000 of revenue and $40,000 in expenses and each spouse has a 50% interest in the business, each co-owner spouse reports $50,000 of income and $20,000 of expenses on their own separate Schedule C (Schedule F for farmers).



Profit Wise can help you find those little tips within your taxes that will save you money in the long run! Wanting to find out? Call 256.489.1478 or schedule a direct appointment below.

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