Employ your spouse
Explore: well supported, often missed.
Hiring your spouse to do real work in your business does more than move income around. It lets your spouse contribute to a 401(k) of their own, roughly doubling what your household can save for retirement each year.
In a business that reports on your own return, it can also open the door to a health reimbursement plan that lets the business cover your family's medical costs as a deductible expense.
How it works
Paying your spouse for real work in the business lets them put their own money into a 401(k). In a business that reports on your own return, it can also let the business cover the family’s medical costs through a health reimbursement plan.
What makes it hold up
- A job description and records of the work done
- Pay at a reasonable rate, run through payroll
- A written health reimbursement plan, if you use one
Risks
Low when the work is real. Spouse wages carry payroll tax, so the benefit is mostly the retirement and health pieces. Health plans don’t work the same way in an S corp.
Questions to ask your CPA
- Is employing my spouse worth the payroll tax?
- Can our company offer a health reimbursement plan?
Common questions
Does my spouse's pay save tax by itself?
Not much. Spouse wages carry payroll tax, so the benefit comes mainly from the retirement contributions and health plan the wages unlock.
How does the health reimbursement plan work?
The business adopts a written plan and reimburses your spouse, as an employee, for medical costs for the employee's family, which includes you. The business deducts it.
Does this work in an S corp?
Not the same way. A spouse of an S corp owner is treated like an owner for benefits, so health benefits are taxed as wages instead of being tax-free.
What makes it hold up?
Real work with a job description, pay at a reasonable rate run through payroll, and records of what your spouse does.
Cratchit runs every strategy in this library against your real numbers, rates it, and keeps the records that make it hold up. Take a guided tour with the Harpers, a sample family.
Try the demoRelated strategies
Education, not advice. Tax law changes and every situation is different, so confirm the details with your CPA or tax advisor before acting. This page was last checked against tax law as of October 2026, including the 2025 tax law, in October 2026.