Can I deduct wages paid to my spouse for STR work?

Yes. Under IRC §162(a), wages paid to a spouse for genuine work in your STR business are deductible as a business expense, provided the work is real, the pay is reasonable, and you treat it like any other employee relationship — written job description, timesheets, W-2 at year-end. Unlike hiring children under 18, spousal wages ARE subject to FICA (Social Security and Medicare taxes).

Are spousal wages exempt from FICA like child wages?

No. The FICA exemption that applies to sole proprietors hiring their children under 18 does not apply to spouses. Wages paid to a spouse employed by a sole proprietor are subject to FICA (Social Security and Medicare withholding) just like any other employee.

Is it better to hire my spouse as an employee or make them a co-owner?

It depends on your goals. As a co-owner (qualified joint venture or partnership), your spouse shares in profits and losses directly without a W-2 relationship. As an employee, they receive a fixed wage that's deductible by you but subject to FICA on both sides. The co-owner approach can be simpler for couples who both participate actively — but it changes the tax treatment of the business income. A CPA can model the best option for your specific situation.

April 6, 2026 · 7 min read

Paying Your Spouse for STR Work: Tax and Payroll Implications

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Under IRC §162(a), wages paid to a spouse for genuine work in your short-term rental business are fully deductible as a business expense. The catch that surprises many hosts: unlike the FICA exemption available for children under 18, wages paid to a spouse are subject to Social Security and Medicare taxes on both sides — meaning the family pays full FICA on spousal wages regardless of business structure.

The Deductibility of Spousal Wages

If your spouse genuinely manages guest communications, handles check-ins, maintains the property, coordinates cleaners, or performs any other legitimate business function for your STR — those wages are deductible on your Schedule C. The requirements mirror any employee relationship:

Work must be genuine and documented
Pay must be reasonable (what you'd pay an unrelated person)
Must be paid by check or direct deposit (paper trail)
W-2 issued at year-end
Time records or job description supporting the work performed

The FICA Catch: No Exemption for Spouses

The biggest difference between hiring your spouse vs. hiring your child is FICA treatment. When a sole proprietor hires their own children under 18, wages are exempt from Social Security and Medicare taxes. This exemption does not apply to spouses.

Wages paid to a spouse employed by the business are subject to:

Employee Social Security tax (6.2% up to the SS wage base)
Employee Medicare tax (1.45% + 0.9% surcharge above $200K)
Employer Social Security tax (6.2%) — paid by you, the business owner
Employer Medicare tax (1.45%)

Total FICA cost: approximately 15.3% on the first $176,100 of spousal wages in 2026. This significantly reduces the tax advantage of paying wages to a spouse vs. simply taking the income yourself on Schedule C (where you'd pay the same SE tax).

Net Benefit Analysis

For spouses paying FICA, the income tax benefit (shifting income to a potentially lower bracket or unlocking additional deductions like an HSA) must be weighed against the FICA cost, payroll complexity, and additional accounting. Run the numbers with a CPA before setting up spousal payroll — the math isn't always favorable.

The Alternative: Spouse as Co-Owner

Rather than an employer-employee relationship, many couples operate as co-owners through a qualified joint venture (QJV). Requirements:

Married couple filing jointly
Both spouses materially participate in the business
Elect QJV treatment by dividing income and expenses on two separate Schedule Cs

Benefits of QJV: no payroll setup, no W-2 issuance, no employer FICA, and each spouse reports their share of business income and SE tax directly. Both spouses build Social Security credits from the business income.

The trade-off: both spouses pay self-employment tax on their share of net profit — the same result as spousal wages, but without the administrative burden of running payroll.

Partnership: When You Live in a Community Property State

Married couples in community property states (AZ, CA, ID, LA, NV, NM, TX, WA, WI) may have additional options for how business income is allocated. Some may elect to treat the business as a community property asset and file without electing QJV. State law matters here — consult a local CPA.

Benefits That Make Spousal Employment Worth Considering

Despite the FICA cost, spousal employment can make sense in specific scenarios:

Access to Employee Benefits

As a W-2 employee, your spouse may be eligible for certain employer-provided benefits that sole proprietor spouses cannot otherwise access — particularly health insurance premium deductions through a Section 105 HRA arrangement. In some structures, this can provide meaningful additional deductions.

Retirement Contribution Unlocking

Spousal wages create earned income that allows contributions to IRAs and, potentially, employer-sponsored retirement plans through the business — amplifying tax-advantaged savings beyond what the owner alone could achieve.

Social Security Credits

If one spouse has been primarily a homemaker or caregiver, W-2 wages build Social Security earnings credits — potentially increasing their future retirement benefits.

Documentation Requirements

The IRS scrutinizes family payroll. For spousal wages to withstand audit:

Written employment agreement or job description
Time records or schedule showing hours worked
Signed W-4 (Employee's Withholding Certificate) on file
Regular payroll schedule (not ad hoc lump sum payments at year-end)
W-2 issued by January 31
Quarterly payroll tax deposits (Forms 941)

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Disclaimer

This article is for informational purposes and does not constitute tax, legal, or financial advice. Tax rules vary based on your specific situation, filing status, entity structure, and jurisdiction. Always consult a qualified CPA or tax professional for guidance on your specific tax situation. IRS rules and thresholds are subject to change — verify current requirements at irs.gov before filing.