| This is a great question!
On the surface, it appears smart to have your wive take a salary. This will enable her to contribute into the social security system with the long term beneficial outcome if you believe, that is, the social security system will be solvent.
I have also heard from loan officers that if both spouses have income it makes for a better credit rating on the couple. I am not 100% certain of this, but this seems to be opinion of some in industry.
The cost of putting your wive on the payroll after you have profits of more than $94,700 would be that she will be paying social security taxes along with medicare taxes, at a combined rate of 7.65% x 2=15.3%.
(Note Social security taxes = 6.2%, Medicare taxes = 1.45%)
Whereas, had you continued taking income after you reached this amount, you would not be subject to Social security taxes of 6.2% and an additional amount matched by your corporation of 6.2%. Hence, you would have saved 12.4% on $42,000.
Medicare taxes have no limits applied to salary, unlike Social Security taxes.
So, you have to decide whether this additional cost of 12.4% x 42,000 = $5,208 offsets the benefits discusses above.
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