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What to do with spousal income?

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  • Avatar zback 
    Participant
    Status: Physician
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    Joined: 12/05/2016

    Wife is going to work part time (10-15k yearly) now to keep her busy, all of her income will be disposable. I’m trying to figure out how to avoid a extra tax hit from that. I already max out a Roth for her. I don’t think she will have any retirement account offered through the job. Recommendations?

    #226359 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3945
    Joined: 01/08/2016
    I’m trying to figure out how to avoid a extra tax hit from that.

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    well for one, stop working.

    I already max out a Roth for her.

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    doesnt change taxes.

    I don’t think she will have any retirement account offered through the job.

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    you dont say if she is 1099 or W2. that will change the answer.

    #226361 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 541
    Joined: 06/18/2018

    She can’t think of any better ways to keep herself busy than some trivially low paid job? Unless part time means single digit hours per week, that seems like a pretty bad time for $ trade.

    No idea what you make, but she could probably save you more than 10k annually by spending that time learning about personal finance and optimizing your situation.

    #226371 Reply
    Liked by Peds
    Avatar pierre 
    Participant
    Status: Resident
    Posts: 164
    Joined: 02/01/2016

    Spend it on something nice

    #226372 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2477
    Joined: 01/03/2017

    Let her do whatever she wants with it.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #226374 Reply
    Avatar wideopenspaces 
    Participant
    Status: Physician
    Posts: 1012
    Joined: 01/12/2016

    I feel like this question is best posed to your wife . . . 😊

    #226375 Reply
    Avatar Larry Ragman 
    Participant
    Status: Other Professional
    Posts: 516
    Joined: 08/30/2018

    If her employer offers a 401k, max that out for additional tax deferred space. Otherwise, of course, she will be taxed at your marginal rate.

    #226376 Reply
    Avatar Larry Ragman 
    Participant
    Status: Other Professional
    Posts: 516
    Joined: 08/30/2018

    Oh, I see from OP one is not offered. Then I’m not sure there is a way around the taxes.

    #226377 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 2582
    Joined: 09/18/2018

    How about an old fashioned IRA instead of the fancy Roth? Peds pointed towards a solo 401k if she can swing it 1099.
    Contrary to some, you are a lucky man. Say thank you if she decides Gross Pay is for a nice vacation and she invites you. She could really use a break if she can get timeoff approved. Respect her efforts. It’s not all about the Benjamins.

    #226384 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3945
    Joined: 01/08/2016
    How about an old fashioned IRA instead of the fancy Roth?

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    over the income limit…

    #226386 Reply
    Avatar zback 
    Participant
    Status: Physician
    Posts: 42
    Joined: 12/05/2016

    Going to be W2 income for her. Household income is in 35% bracket

    #226388 Reply
    Avatar DCdoc 
    Participant
    Status: Physician
    Posts: 473
    Joined: 06/14/2016

    It’ll probably cover her gas to drive to work, and the food she’ll eat while working, after taxes are paid. I guess you could take a week per year of vacation “on her.”

    #226395 Reply
    wonka31 wonka31 
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    Status: Physician
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    Joined: 03/24/2018
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    I mean even if you’re in the 37% tax bracket plus state taxes, you’ll pay maybe 40% ‘off the top’ in taxes, leaving 60% gross. So you still have $6-$9k left over and that’s not nothing. If you don’t need it, I’d say invest half and spend the other half on whatever the heck you two want to. Although it’s not life changing money, that’s a lot of money to some people. For you, that covers a great vacation, multiple 529 contributions if you have kids, a few mortgage payments, fun money, etc. If she likes the work and can make that much while doing it, good for her.

    #226440 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1209
    Joined: 02/11/2019

    My wife’s work after taxes barely covers the child care. But if keeps a foot in the door for her and she wants to do it. Even if it was a small loss I would not oppose if she wanted it.

    “Never let your sense of morals prevent you from doing what is right.”

    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 541
    Joined: 06/18/2018

    “I mean even if you’re in the 37% tax bracket plus state taxes, you’ll pay maybe 40% ‘off the top’ in taxes”

    FICA plus state tax probably gets to almost 50% marginal.

    If you’re in the 35% bracket (408-612k mfj) like OP said he is, gotta be a pretty sweet gig to justify the bother for 5-8k post tax. And if it’s that sweet, why not full time?

    #226448 Reply

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