Paying spouse and children

[SamEfford]

I am speaking with my accountant about this, but I wanted to get some feedback on how other investors are structuring paying spouses and children for work performed with my investments.

I run my rental properties as a sole proprietorship, however my wife and oldest daughter do a lot of work when it comes to inspections, cleaning, depositing cheques, and other duties when I am tied up with my J-O-B.

Any ideas or examples would be greatly appreciated

 

[albainstar]

Well if they are actually doing work then it seems reasonalble to pay them

If you are doing it to lessen your taxes maybe buying them a spousal RSP and RESP for the kids would be better?

Check with an accountant and a money manager, somethmes the accountants dont have all the ideas- get that from the manager- then check with the acct it is legal

 

[timk519]

As long as you pay them the market rates (ie, don`t pay them $1000 for something you`d only pay someone else $100 for) and do all the normal tax with-holding, etc. then you`ll be fine.

 

[ToddStokowski]

Depending on the situation, income splitting may be a great way of decreasing your family`s overall Income Tax liability.

The amount paid to any family member must be reasonable for the work that was done.

To determine if the amount is reasonable, ask this question - Would I pay this amount to a non family member? If you answer "yes", then the amount is reasonable. If the answer is "no", then the amount may be too high.

Depending on the situation, you may be required to treat your family member as an employee when making payments for services. As a result, proper employee deductions are required. Consequently, this may decrease the Income Tax benefit of income splitting.

In most situations, income splitting is a great Income Tax planning tool - check with your Accountant to see if this works for you!

Todd Stokowski, CA