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the value of remaining a stay at home mom vs a little extra income
Sent to Tax Experts July 17 12:58 PM

my husband works full time and earns $126,000 including bonuses for the year.
I currently stay at home and look after the children but am considering beginning some work from home selling through a website via an established consultant based sales company. My question is, will my husband be worse off if I work as I wont be a deduction on his tax, and by how much?
I would like to do this home working oportunity but dont want to end up increasing my husbands taxes or decreasing any tax rebate at year end.

 

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bothell, Washington

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July 17 1:10 PM (12 minutes and 10 seconds later)
         
REPLIEDCheck Mark
Hi there,

In general, extra income is not a bad thing, as at yours and your husbands income level, you don't need to worry about the earned income credit, which at some point goes down the more income you make.

However, there can be other negative consequences, such as loss of credits, loss of itemized deductions, loss of exemptions, etc.

Most of my clients that are married regret their "side jobs" or home businesses that are considered self-employment income because the tax burden, consising of state income tax, federal income tax, and self employment taxes is staggering. In some cases, more than 50% of the extra income is reduced by taxes.

I don't understand why you think that you won't be a deduction for your husband? Are you considering filing separately? It is generally much more beneficial to filing jointly, especially when children are involved. You are allowed to file jointly even if both spouses are working. Married filing separately status has a lot of negative consequences, such as, both spouses must either itemize or take the standard deduction, loss of certain credits, lower limits on cap. losses, etc.

Do you have an estimate on the net profit you will be making yearly through this business? If so, I could do an estimate of your tax liability with or without the extra income.

Best of Luck with your situation. If you feel I answered fairly, please hit "ACCEPT". If not, let me know! Feedback and bonuses welcome!    Wendy D. Rieger, Enrolled Agent
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Wendy Rieger -- Enrolled Agent -- 100% Positive Feedback on 1708 Tax Accepts
10+ years tax preparation and tax advice.
Reply
July 17 1:17 PM (7 minutes and 26 seconds later)
         
Reply to Wendy Rieger's Post: I dont have any kind of estimate as yet but it would probably only be about $500 a month - just pocket money i know but it would pay for the car!

We are from the uk and so are prety novice about the US tax system. I knew we would still file jointly but thought that if I worked (even in such a light capacity) that I would no longer be a deduction on his tax. You also mention loss of credits/deductions etc.
Customer (name blocked for privacy)
Answer
July 17 1:28 PM (10 minutes and 54 seconds later)
         
REPLIEDCheck Mark
When you file jointly and whether or not you work, it is both of YOUR income and YOUR tax, not just his.

In any event, I did a rough estimate based on married filing jointly, both of you under 65, and with 2 children under 17, and with using the standard deduction instead of itemizing.

If you do not have the extra job, your tax liability would be 17540, and if you do have the extra job with a net profit of 6,000, your tax liability would be 20,082, a difference of 2542. This is about 42% of that extra income.

If any of my assumptions are incorrect, and you would like to give me an estimate of your itemized deductions, let me know and I will refigure. However, I hope this calculation gives you some idea of what to expect with that extra income. You will have to decide if that much of a tax bite is worth your time and efforts.

Best of Luck with your situation. If you feel I answered fairly, please hit "ACCEPT". If not, let me know! Feedback and bonuses welcome!    Wendy D. Rieger, Enrolled Agent
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Wendy Rieger -- Enrolled Agent -- 100% Positive Feedback on 1708 Tax Accepts
10+ years tax preparation and tax advice.
Reply
July 17 1:33 PM (5 minutes and 4 seconds later)
         
Reply to Wendy Rieger's Post: i take it that would actually reduce any rebate at the end of the year too ?
Doesnt really sound like it is worth the hassle !

Is it possible to put a monetary figure on the value in tax terms of having me not working - so that then I can consider what type of incume I would need to earn to make it worth while?

By the way I will definately be clicking the accept button as you have already been very helpful ! Thanks
Customer (name blocked for privacy)
Answer
July 17 1:40 PM (6 minutes and 58 seconds later)
         
ACCEPTEDCheck Mark
I am not sure what rebate you mean, do you mean tax refund? The refund is calculated by considering what income has been earned all year and how much tax was already paid, so if your tax is increased, your refund is decreased.

The monetary figure of you not doing the at home business would be the extra income 6000 minus the tax burden, 2,542. Therefore you are "losing" 3458 by not working. Perhaps you may consider taking a job as an employee, even one that you could do from home. You would have to make sure that you were paid on a W2 form at the end of the year and not a 1099MISC. Working at home this would save you 7.65 % tax on any income you make. This represents the employers contribution to social security and medicare that you pay if you are self employed.

Also, if you get a part time job out of the home and incur daycare expenses, there is a daycare tax credit up to a certain maximum 20% (6,000) for two children--Max of 1200 at your income level. However, you will also incur the cost of daycare, which may be more expensive than the tax burden! Just some other info for you to consider.

Best of Luck with your situation. If you feel I answered fairly, please hit "ACCEPT". If not, let me know! Feedback and bonuses welcome!    Wendy D. Rieger, Enrolled Agent
Picture
Wendy Rieger -- Enrolled Agent -- 100% Positive Feedback on 1708 Tax Accepts
10+ years tax preparation and tax advice.
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