Today’s Micro-Business Tactic: Hiring Your Spouse or Children: A Strategic Tax and Business Move

Hiring your spouse or children in your micro-business isn’t just a feel-good move, it’s a tactical, IRS-approved way to reduce taxes, build family wealth, and maximize your business benefits.

As a physician-entrepreneur, you already know how powerful it is to control your income through a professional micro-corporation. But what you might not realize is that you can also structure employment within your business to keep more wealth inside your household, legally and strategically.

Let’s walk through how this works, what to watch for, and why more of my coaching clients are hiring family members as part of their entrepreneurial playbook.

Hiring Your Spouse: Income Shifting, Retirement Perks, and More

Income Shifting to a Lower Tax Bracket

If you're earning in the 32–37% tax bracket, and your spouse isn’t working or is earning less, hiring them and paying a reasonable salary can shift some of your business income into their lower tax bracket.

Example: If you're in the 37% bracket and shift $30,000 of income to a spouse in the 12% bracket, you can save nearly $7,500 in federal taxes.

Retirement Benefits

Your spouse becomes eligible for retirement contributions:

• Solo 401(k): Contribute up to $23,500 (2025) + employer match

• SEP-IRA or employer plan: 25% of their compensation may be deductible

This helps you shelter more income while funding your family’s future.

Health Insurance + Fringe Benefits

Hiring your spouse allows you to:

• Offer health insurance through the business

• Deduct fringe benefits like disability, life insurance, and even travel costs when related to business needs

Business Travel Write-Offs

If your spouse provides services like bookkeeping or event planning, their business travel (lodging, meals, airfare) becomes deductible. Otherwise, it’s a personal cost.

Hiring Your Kids: The Ultimate Micro-Business Tax Hack

This is where the savings get even sweeter , especially for those operating as sole proprietors or single-member LLCs.

💰 Tax-Free Income

Children can earn up to $15,000 tax-free in 2025 using the standard deduction. That means:

• You deduct the salary from your business income

• They pay zero federal income tax on it

No Payroll Taxes

If your child is under 18 and you run a sole proprietorship or SMLLC:

• No Social Security or Medicare taxes (15.3% savings)

• Compare that to hiring a non-family employee, it’s a big difference

• Back in the day when my kids were younger, I did this through one of my residential real estate LLC’s

College or Roth IRA Contributions

Your child’s earned income can go toward:

• Tuition or other expenses

• Up to $7,000/year in a Roth IRA (2025), growing tax-free

• Each of my 3 youngest children have Roth IRA’s fueled by this approach.

That’s the start of generational wealth.

What Counts as Legitimate Work?

It’s got to be real, age-appropriate and documented.

Examples of Legitimate Tasks:

• Filing, scanning, and organizing

• Running social media (think digital-native teens!)

• Cleaning or prepping your home office

• Helping with video editing, blog formatting, or email setup

• Cleaning, maintaining, mowing lawn, or upkeep of a property.

Pro tip: Work with your accountant to keep time logs, job descriptions, and pay records. A formal employee file for each family member protects you in case of IRS scrutiny.

Key Compliance Considerations

• W-2 status only: Never issue a 1099 to a spouse or child, they must be treated as employees.

• Use a payroll system: Gusto, or even a local accountant can help.

• Pay a reasonable wage: It should align with market rates for the work performed.

Lessons from the Field

“One of my clients realized they could reduce their effective tax rate by over 10% just by hiring their 16-year-old to help with YouTube editing and scheduling. They shifted $12,000 in income, paid no payroll taxes, and funded a Roth IRA for college savings.”

— Physician Business Coaching Client, PEA Pro Member

Tool of the Week: "PEA-SimpliMD Tax Deduction Guide for Micro-business owners"

“This downloadable tool will help you execute today’s strategy in 10 minutes. It includes task ideas for hiring kids, spouse compensation models, and documentation checklists.”

👉 Download the Guide →

Keep Learning: Recommended Resources

• Free E-Book: Home Office Deductions for Micro-Business Owners

• Workshop Tool: PEA-SimpliMD Mindset Mapping Worksheet

• Course: Doctor, You Are a Business

• Read More on The Independent Physician Blog:

  • Top 15 Tax Deductions for Doctors Who Are S-Corps

  • Your Household Dollar Flow Differently As A Self-Employed Doctor

Scale with Coaching CTA

Want personal guidance on setting up a compliant, tax-efficient payroll structure for family members?

I’ve helped dozens of micro-business physicians do exactly this in a 1:1 coaching format. You’ll walk away with:

✅ Your structure mapped out

✅ Salary benchmarks

✅ Payroll system options

✅ Audit-proof documentation plan

🎯 Book a Strategy Consultation Session →

💡 Get Started With 1:1 Business Coaching Today →

Final Thoughts: Your Family Is Part of Your Micro-Business Legacy

Hiring your spouse or children is a savvy, strategic way to lower taxes, create real work opportunities, and foster generational wealth. When structured correctly, this isn’t a loophole, it’s smart stewardship.

If you haven’t explored this yet, it’s time to stop leaving money on the table.