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Termyn8or -> RE: Tax question (4/10/2009 10:38:36 PM)
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FR
Took me a bit to wrap my mind around this, but it might work. Pay the slave. Whatever you put off to the W1099 or W2 is deductible. They are then expected to kick in their share, as well as pay a reasonable rent. This rent must be low for it to work to your advantage in the sense of a "family" and if this is really long term look at it this way.
Now if the main provider is in a higher tax bracket, this can work and should be totally legal. This would come under domestic help. Fix it so their set hours of work comply with minimum wage laws, charge them a very reasonable rent, undeer $600 per year might fly even under an audit. I am not sure but could find out.
The rent is all you collect though, their share of utilities and food and everything else like that is simply a private matter. In other words if your roommate springs for a pizza do you have to put that down as income ? Similarly private is that paying a portion of all house utilities, which can add up, but as far as the tax man is concerned that is simply forwarded to the providers of said utilities. The rent is low because it is only for the space, nothing else.
In that way a portion of the expenses is passed throught their hands, but as I said you are simply passing it on to the providers, with no profit made, there is no tax to be paid. It is much different than owning an apartment building or something like that. It is also your private home, and there are different rules of tenancy, but that is not what you asked.
Even if the slave holds an outside job, as long as he/she is not hit with a higher rate, you can be collectively better off, legally. You will have to keep books. I think really though, unless you are paying taxes on $90K a year or more it is not worth the trouble, but I am sure it can be done legally. Just takes a bit of thought.
It all depends on your particular tax situation. You will have the overhead of 7% for SS, comp, UI, this all must be factored in. This is why I said you probably don't want to bother unless your paying on $90K or more a year. In the end it wouold actually be a net loss. Note that the figure of $90K a year might vary by geographic location, primarily based on the average living cost in any given area. For example the crossover point might come at a different income level in Kansas than say California.
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