Home Care Business Tips
Think your spouse has certain skills that can help your business grow? Here are few ways to benefit from putting your loved one on the payroll:
A Personal Interest
Many start-up home care agencies are on a very tight budget, which might make it difficult to find capable personnel. Sometimes the individual with the best resources lives under the same roof. A spouse, even on a part-time basis, may make a better contribution than a regular employee.
Tax Savings
While not exactly an earth-shattering savings, business owners who hire their spouses can avoid paying a federal unemployment tax on their spouse’s earnings. For 2008, the 6.2% federal unemployment tax applies to the first $7,000 that you pay to each employee as wages during the year. Additionally, some states waive this tax as well.
Insuring Your Health
Hiring a spouse can also lead to health-insurance savings. In states that don’t allow “group of one” plans, sole proprietors with a spouse on the payroll can sometimes qualify for small group insurance policies. Group policies, which provide group rates, tend to be cheaper than individual policies. You’re also able to write off the full cost of coverage as a business expense rather than an adjustment to income, which is currently how sole proprietors whose spouses don’t work for them write off their medical coverage. Deducting the cost of health insurance for these business owners simply reduces their income tax only. Business owners who, instead, deduct health-care premiums as a business expense also are shielded from having to pay the 15.3% self-employment tax on those funds. However, entrepreneurs only save 15.3% if they earn $102,000 or less. Otherwise, you only get the 2.9% [Medicare tax] savings.
Health Cost Savings
Business owners who hire their spouses also can establish health reimbursement accounts, open to any business with at least one employee. Like health savings accounts, HRAs offer a tax-advantaged way to pay for out-of-pocket medical expenses such as eyeglasses and prescription drugs, which typically aren’t covered by insurance. However, unlike HSAs, contributions to HRAs, which are limited to an employee’s income level, can fund health-care premiums. (HSA funds can be used toward premiums too, but only upon retirement.) Additionally, individuals don’t have to own high-deductible health-care policies, which can cost $1,800 to $2,500 a year. Reimbursement payments made to employees for qualifying expenses aren’t taxable. And sole proprietors are able to deduct those payments as business expenses.
Social Security History
Another benefit to hiring a spouse who, for example, wasn’t already working is that he or she can establish a Social Security history. According to the U.S. Social Security Administration, to receive benefits an individual must earn a certain number of credits, which in 2008 are worth $1,050 each. While the number of required credits differs depending on a person’s age and type of benefit, individuals can earn a maximum of four credits each year. This means that a person’s total annual income could potentially need to reach roughly $34,000 to trigger a $4,200 Social Security tax. Keep in mind that most people need to earn about 40 credits to qualify for retirement benefits. With two spouses paying into the system, you could end up with more net Social Security benefits at retirement rather than a single wage earner.
Submitted by: David Goodman, President Companion Connection Senior Care, the leading “no royalty” membership organization serving the non medical home care & licensed home health business communities. The need for home based senior care is soaring! We will help you start your own highly successful Home Care Agency business. Earn an excellent income while helping others with their activities of daily living. Contact us today for your FREE Business Info Kit… 1-800-270-6949