Can you take off an exclusion as a business expense?

[user0607121985]

One of my clients who is a real estate agent said that she sat in a session of a Tax attorney who said (if she understood it correctly), that you could take an exclusion for working a family member in your business and take it off as a deduction.  Is this true?

[rbynaker · Accepted solution]

Huh?  What's an "exclusion"?

When you pay your working family member wages, you report those wages on form W-2.  The wages and associated employer payroll taxes are deductible on Schedule C.  The wages are included on that family member's 1040.  So if it's a spouse, you're moving it from Schedule C to 1040 Line 1.

[abctax55]

Either your client "mis-heard" what the attorney was saying, or they should find a different attorney.

Or, let HIM do the tax return

[ehill]

Maybe the attorney was talking about like Fica/Medicare/Futa for the "exclusion", not the word I would have used.  But that would make sense for a child or spouse employee.

[IRonMaN]

When is the next class?  I'm eager to learn about things I never heard of before.