topic LLC with spouse questions - what to claim where in Business & farm

LLC with spouse questions - what to claim where

rwom1217 — Tue, 24 Feb 2026 07:29:38 GMT

My wife and I have a home business. It is a side gig--my regular FT job is outside the home. In our state, it is considered a single-member LLC, so taxes are filed jointly. Practically speaking, I do all of the work. Should I be splitting everything 50/50 in regard to income, expenses, inventory, etc? On a related note, when it asks if I "share this home office," what would be the correct answer?

Re: LLC with spouse questions - what to claim where

Bsch4477 — Fri, 01 Sep 2023 23:32:30 GMT

Complete 2 Sch C forms splitting income and expenses with your wife. That way each of you will get credit for your social security tax payments which are part of your self employment tax. You are not sharing the home office. You claim half and she has half accounted for in your separate expenses on your separate Sch C’s.

Re: LLC with spouse questions - what to claim where

rwom1217 — Sat, 02 Sep 2023 00:34:21 GMT

What about her actively participating? Functionally, I do everything.

Re: LLC with spouse questions - what to claim where

Rick19744 — Sat, 02 Sep 2023 00:37:37 GMT

I think it would be good to know your state of residency to confirm that you are eligible to file as noted by @Bsch4477 and that this LLC is jointly owned.

It's always good to start down the correct path.

Re: LLC with spouse questions - what to claim where

rwom1217 — Sat, 02 Sep 2023 00:48:24 GMT

Additionally, when it is asking about things like mortgage interest and real estate taxes, do I put half of the total on each of our forms, or do I put the full amount on both and the program figures it out?

Similarly, do I enter the full square footage of the home office on both, or half of total on each?

Re: LLC with spouse questions - what to claim where

Opus 17 — Sat, 02 Sep 2023 23:51:10 GMT

No no no stop.

More information is needed.

"it is considered a single-member LLC" makes no sense. Either you went to the secretary of state and filed paperwork to register as a single member LLC, or you did not. If you did not specifically register as an LLC, you are not an LLC. You are an unincorporated/simple sole proprietorship. If you did register as an LLC, then the membership is determined by what you put on the papers. If you included your wife then it is a two member LLC; if you only listed yourself it is a single member LLC. Nothing is automatic or assumed, it depends on what paperwork you actually filed with the state government.

If you registered as a single member LLC, then:

All the business is reported on your schedule C ONLY. If your spouse materially participates, you can either:

1. pay her a wage that reflects her participation and issue her a W-2, or

2. make her a subcontractor, pay her for her participation, and issue her a 1099-NEC. In this case, you report the all the expenses of the LLC on your schedule C, and she will have a separate schedule C and will only report the expenses that she particularly incurred while performing her subcontracting duties. Her business (as a subcontractor) is completely separate from your business.

The payment you make to her as wages or a subcontractor is, of course, one of your deductible business expenses.

If you are not registered as an LLC or S-corporation, then you have these options:

1. You report 100% of the business and you pay her a wage and issue her a W-2 as described above, or

2. You report 100% of the business and make her a subcontractor and issue her a 1099-NEC as described above, or

3. The two of you file as a qualified joint venture. Each spouse files a schedule C in their own name to report their share of the business income and expenses. It might be 50/50, or it might be something else, depending on how the work load and duties is actually divided. (Note that if you are in a community property state, you must divide the income and expenses 50/50 even if that is not how the work is divided.)

If you registered as a 2-member LLC with your spouse as the other member, then:

1. If you live in a community property state, you file 2 schedule Cs each listing half the income and expenses, even if the work is divided unevenly.

2. If you do not live in a community property state, you file a form 1065 partnership tax return for the partnership. The 1065 lists all the partnership income and expenses. As part of filing the 1065, each partner gets a form K-1, listing their share of income and expenses, and the K-1 is added to the person's regular tax return along with any other income and expenses. The income and expenses on the K-1 can be divided by percentage of effort, it does not have to be 50/50. Form 1065 for a partnership was due March 15, not April 15, unless you got an extension (and the extension for form 1065 is different from the extension for form 1040). The late fee for filing a 1065 late is $195 per month per partner.

Re: LLC with spouse questions - what to claim where

Opus 17 — Sat, 02 Sep 2023 23:39:45 GMT

@Bsch4477 wrote:

Complete 2 Sch C forms splitting income and expenses with your wife. That way each of you will get credit for your social security tax payments which are part of your self employment tax. You are not sharing the home office. You claim half and she has half accounted for in your separate expenses on your separate Sch C’s.

If this is a single member LLC, they do not file 2 schedule Cs and divide the business, no matter what state they live in. They can only file as a qualified joint venture if the business is not registered as an LLC. If is it is registered as a two-member LLC, they also don't file 2 schedule Cs unless (and only if) they are in a community property state.

Re: LLC with spouse questions - what to claim where

Anonymous_ — Sun, 03 Sep 2023 02:11:15 GMT

@Opus 17 wrote:

If you did register as an LLC, then the membership is determined by what you put on the papers. If you included your wife then it is a two member LLC; if you only listed yourself it is a single member LLC...

That is not necessarily the case because the "papers" (aka Articles of Organization) filed with the state typically only require the name of the person registering the LLC, the agent for service of process, and the name of a responsible party for the LLC (i.e., a person who is authorized to legally bind the LLC).

Merely by reviewing the Articles, you would generally have no idea whether the LLC has one member or a thousand. Information of that type is usually found in the Operating Agreement, which is not filed with the state.

You're most likely conflating the procedure for obtaining an EIN from the IRS for the LLC with the state registration process. With respect to the former, the IRS does require the applicant to designate whether the LLC is a single-member or multiple-member LLC.

Re: LLC with spouse questions - what to claim where

Opus 17 — Sun, 03 Sep 2023 03:33:56 GMT

@Anonymous_

Thanks for the clarification.

I still think the in the statement "In our state, it is considered a single-member LLC" makes no sense with respect to "considered." Either it is, or it isn't, based on the Operating Agreement (assuming @rwom1217 has one).

My guess is that @rwom1217 is confusing a sole proprietorship with an LLC and that Articles were never actually filed, because if they were, he would have just said so. I think they are confused because a SMLLC and a sole proprietorship usually file the same kind of tax return. But once you bring in a second person who participates in the business, it starts to matter very much exactly how the business was filed, or not filed.

But only they can clarify.

Re: LLC with spouse questions - what to claim where

Anonymous_ — Sun, 03 Sep 2023 14:21:36 GMT

@Opus 17 wrote:
But only they can clarify.

I agree; that initial statement is ambiguous and needs clarification.

One thing is apparent from the original question is @rwom1217 purportedly "does all the work". As a result, if there is no LLC a QJV won't work (technically) since @rwom1217's wife does not materially participate.

It appears as if the yield here, assuming a joint return, is there is little impact in terms of reporting, regardless, other than @rwom1217's wife getting credit for Social Security and Medicare.

Re: LLC with spouse questions - what to claim where

rwom1217 — Mon, 04 Sep 2023 18:26:24 GMT

We are in a community property state. The Entity Type on our associated .gov website has us listed as a "Domestic LLC," with my wife and I as the Members.

My wife does not materially participate, hence some of my questions.

Re: LLC with spouse questions - what to claim where

Anonymous_ — Sun, 10 Sep 2023 13:46:35 GMT

I have to presume the ".gov website" was where you received the EIN for the LLC.

Regardless, Rev. Proc. 2002-69 allows filing as a partnership (Form 1065) or as a disregarded entity.

See https://www.irs.gov/pub/irs-drop/rp-02-69.pdf

Re: LLC with spouse questions - what to claim where

rwom1217 — Mon, 04 Sep 2023 18:50:53 GMT

The site was state level, not federal (we do have an EIN though). I am researching whether to file as a partnership or disregarded entity. When I make the decision, where in TT do I tell it which of the two (or does it figure it our automatically based on me answering the programmed questions)?

Re: LLC with spouse questions - what to claim where

rwom1217 — Mon, 04 Sep 2023 23:05:33 GMT

If going the separate schedule C's route, when it comes to using a personal vehicle for the business, would I still split the miles in half between us, even though she did not do any business related driving?

Re: LLC with spouse questions - what to claim where

Anonymous_ — Sun, 10 Sep 2023 13:45:23 GMT

The program will not allocate automatically when a separate Schedule C is filed.

Re: LLC with spouse questions - what to claim where

rwom1217 — Mon, 04 Sep 2023 23:56:59 GMT

Thanks. Some functional questions...

- With a personal car used for business purposes, would I split the mileage based on our interest even though she did not do any actual business driving?

- In regards to deductions like mortgage interest as it relates to the home office. It asks me to put in the amount from the 1098. Would I split that? It feels odd to do so because it is a specific number from an official document.

- On a related note, I assume I'd manually split points paid on a refi?

Re: LLC with spouse questions - what to claim where

Opus 17 — Tue, 05 Sep 2023 00:05:24 GMT

@rwom1217 wrote:

If going the separate schedule C's route, when it comes to using a personal vehicle for the business, would I still split the miles in half between us, even though she did not do any business related driving?

I'm concerned about the prior question, "when I decide."

As mentioned by @Anonymous_ , you file Articles with the state to create the LLC but the state doesn't necessarily know your Operating Agreement which lists the members of the LLC and other legal matters. If you don't have an Operating Agreement in writing, you should get a local attorney to help draft one, there are probably some standard things that need to be in there, especially in a community property state.

It's important to understand that LLCs are created by state law and the IRS does not recognize them as separate entities. Under federal tax law, you either have a partnership or a disregarded entity (sole proprietorship). If a partnership, you file a 1065 unless you are in a community property state and the only partners are the spouses. You can't flip-flop between a single member and two-member LLC. Maybe you haven't thought this through thoroughly, but you need to do that soon, and get something in writing in case of audit.

Presuming this is a 2-member LLC with the only members being spouses in a community property state, you divide all your income and expenses exactly in half, even if that is not how the participation is divided.

Re: LLC with spouse questions - what to claim where

Opus 17 — Tue, 05 Sep 2023 00:09:29 GMT

@rwom1217 wrote:

Thanks. Some functional questions...

- With a personal car used for business purposes, would I split the mileage based on our interest even though she did not do any actual business driving?

- In regards to deductions like mortgage interest as it relates to the home office. It asks me to put in the amount from the 1098. Would I split that? It feels odd to do so because it is a specific number from an official document.

- On a related note, I assume I'd manually split points paid on a refi?

In a community property state, if you file as 2 schedule Cs, you list the expenses and income exactly in half.

Regarding a home office, you would treat half the home office on spouse A's schedule C and half on spouse B's schedule C. Suppose the total home office space is 10% of the house. Put on your tax return that spouse A has a home office of 5% of the space and spouse B has an office of 5% of the space. 5% of the mortgage interest, property taxes, utilities and insurance are listed on spouse A's Schedule C, 5% on spouse B's schedule C, and the remaining 90% will go on Schedule A as personal mortgage interest.

If you are asking, how to navigate the interview to get this result, I don't use this section of the program. If you need more help than what I gave above, I can ask someone else who uses that section of the program more often.

Re: LLC with spouse questions - what to claim where

rwom1217 — Tue, 05 Sep 2023 01:26:26 GMT

Yes, community property state, LLC with spouses as the only members (partnership).

I do need help with navigating the interview. I don't know what it figures out based on the questions vs what I need to do manually.

For example, it asks about amounts from form 1098. That is a specific number from an official doc. I don't want to split that in half if I am not supposed to and have it look like I was being dishonest (even though it would not be in my favor to do so if I was not supposed to).

Re: LLC with spouse questions - what to claim where

Opus 17 — Tue, 05 Sep 2023 05:08:57 GMT

@rwom1217 wrote:

Yes, community property state, LLC with spouses as the only members (partnership).

I do need help with navigating the interview. I don't know what it figures out based on the questions vs what I need to do manually.

For example, it asks about amounts from form 1098. That is a specific number from an official doc. I don't want to split that in half if I am not supposed to and have it look like I was being dishonest (even though it would not be in my favor to do so if I was not supposed to).

You have two separate businesses.

You don't split the 1098. If Turbotax asks, how big is the home office, use half the size for each spouse. For example, a 2000 sq foot house with a 200 sq ft office, tell Turbotax that business A has a 100 sq ft office. Enter the entire interest amount. Turbotax will assign 5% of the interest to the office. Same with all the other office expenses. Then, when you go to business B for the other spouse, again indicate a home office of 100 Sq ft, and enter all the household expenses again. Turbotax will assign 5% of the expenses to office B.