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Moving Income to Spouse

My wife may want to buy a condo, in her name only, and be limited by what the bank will consider as her income. She currently lives in Canada but assume this all takes place after she has moved to the USA.

(Sidebar, I think it's insanity to say that someone can only spend 28% of their income on housing, making no distinction between a 2-income household with no dependents and a 1-income household with 2 or 3 rugrats.)

I have consulting income. What if I paid her some significant portion of that for her "assistance" and issued her a 1099?

Some relevant facts.

1) I work overseas and have no FICA wages. The amount involved is high 4 or low 5 figures. Either of us will have to pay the full 15.3% self-employment tax. 2) We would presumably have to slot ths consulting income as having been earned by her while outside the USA, so no state tax would apply. I am of course legitimately doing the work while overseas.

I think that if I do #1 and #2, we are paying the same tax we'd have paid otherwise. I've often seen suggestions that children be paid for doing routine household chores, so that they can put the money in a Roth IRA, which does (at the end of the day) result in a tax savings. My plan doesn't even reduce our taxes.

Comments? Am I being sane here or flying too close to the sun and my wings will melt?

Reply to
Hank Youngerman
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for her "assistance" and issued her a 1099?

You'd be filing a false tax document. Don't do it. Find yourself a good mortgage broker who can advise you on legal options.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

Reply to
Phil Marti

sounds like it might also be fraud in the procurement of the mortgage. That is SO yesterday!

Reply to
Pico Rico

Why would you issue your wife a 1099-MISC. While on your Schedule C you would get a deduction, she would report it as income, so it balances out. And on top of that she must pay 15.3% tax on it. You got just as well give her the money. No tax considerations if both of you are US citizens. Besides, I don't know if you can actually issue a

1099-MISC to your wife.
Reply to
remove ps

If you read the original post and some of the replies, the implication is that he wants to help her get more qualifying income for a mortgage.

In addition to all the other replies, most if not all US lenders are going to want to see several years of history (tax returns, etc), so what you are trying to do probably won't even work in the short term, aside from all the other issues.

Reply to
Mark Bole

The usual approach in a case like this, assuming the spouses are on good terms, is to put both names on the deed and the mortgage, then later if she has more (real) income, see if the bank will agree to putting them in her name only, or if they won't, perhaps refinance with a bank that will.

On the other hand, so long as they plan to stay married, there's little reason not to leave both names on indefinitely. If she plans to pay the taxes and mortgage, she can do so either way.

Reply to
John Levine

Dummies",

This is a taxes group, not a finance group, so maybe I'm OT here.

Yes, what I'm trying to do is get more income in my wife's name so that she can qualify for a mortgage on her own.

In the likely scenario, she will be moving from Canada to the USA and taking a pay cut - so even with "self-employment income" from me, her income at the point of qualifying would be lower than it was for full tax year 2011.

I don't think it really affects our tax liabiilty based on who gets the money. I work overseas, so have no FICA wages, so I'm nailed for the full 15.3%. I am using my full FEIE, so the additional money will be taxed as regular income no matter which of us pays tax on it. Our USA address is in North Carolina, which exempts up to $50K of business income, so we won't owe state income tax on it regardless of whether the work is done overseas (hence no state income tax) or in North Carolina (under the exemption).

But for a variety of reasons, we don't want my name on the deed.

I might be able to get my client to pay her under her EIN, rather than me. As long as that doesn't reduce our taxes, I wouldn't feel guilty tax-wise. And frankly, nothing will make me feel guilty about circumventing the ridiculous bank rules that treat someone making a certain amount the same whether they are single, or married with no kids, or have a stay-at-home spouse and three kids at home.

Reply to
Hank Youngerman

If you're doing the work, that seems like fraud against the bank.

Seth

Reply to
Seth

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