When one spouse owns a business, the couple will have a more complicated tax return. So, if your business income is low, you can add your spouse’s employment income to it to increase your Section 179 deduction for the year. However, for Section 179 purposes, net business income includes your spouse’s employee income. If the value of the assets you purchase exceeds your net business income, you have to deduct the excess amount in the following years. But, you may deduct no more than your net taxable business income for the year.
Section 179 allows you to deduct the full cost of equipment and other long-term assets in a single year rather than depreciating it over several years.
This deduction is also called the Section 179 deduction, based upon the Internal Revenue Code section establishing it. That is to say, the first-year expensing deduction. Examples include business travel and mileage, an outside or home office, equipment, business insurance, and other business expenses.īut, the fact that one spouse is an employee can have a considerable impact on one important business deduction. The owner gets to deduct any ordinary and necessary expenses incurred to run the business. The owner-spouse gets treated like any other sole proprietor. The fact that the business-owner spouse is married doesn’t make much difference as far as business taxes go. Such a spouse is also ordinarily treated as a sole proprietor if he or she forms a one-owner limited liability company (LLC) to run the business. This scenario means he or she owns the business. If one spouse individually owns a business and operates it himself or herself, the business-owner spouse is a sole proprietor. Here are a few advantages to consider for married couples filing separate returns. We’ll assume you and your spouse file a joint tax return, as almost all married people do. Or, vice versa.ĭoes this affect the personal tax return you and your spouse file? Yes, it does. Your spouse works as an employee in someone else’s company and receives a Form W-2 reporting his or her employment income.