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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 577
Experience:  10 years experience
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Small business. Working with a contract employee. If I want

Customer Question

Small business. Working with a contract employee. If I want to increase my income level for two years so I can gain a bigger house loan, can I pay him less (or just hire him less)? If I then want to increase his income level for 2 years, so he may gain
a bigger house loan, and pay myself significantly less, is this legal? He's on contract and it is a sole-proprietorship. Self employment makes getting reasonably-sized home loans difficult because the bulk of my rents are write-offs. He is close, we are gay,
but we are unmarried. Does this change if we get married?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
If you will be married for federal tax purposes - then you will likely apply for the mortgage jointly - and it woudl not matter whether that is your income or income of your to-be-a-spouse.So far - we are taking about ho income is divided between you as a business owner and your contractor - who is a self-employed independent contractor (not an employee!)That is based strictly on the agreement between you and the contractor - and you may negotiate the compensation as you both agreed - there is nothing illegal;
Customer: replied 1 year ago.
Finally I've figured out how to pay more taxes to get a better loan!!!!Now I just have to figure out the balance to save the most money.... that's easy. Finding the right way to ask the question so every tax adviser doesn't accuse me of fraud has been very difficult. Not a creative bunch, I guess.
Expert:  Lev replied 1 year ago.
However - please be aware that the mortgage company is looking to the amount of NET business income - after all qualified business deductions. So if you want to have larger net business income - you will have larger tax liability - - that includes income tax and self-employment tax.
Customer: replied 1 year ago.
Understood. But in the long run, say 30 years, earning an extra 100k for two years will grant me a significantly higher loan in the third year. Any one time costs will very, very likely yield much higher returns due to compound interest/opportunity costs.Seems like it'd be best for us to get married once it's legal though.
Expert:  Lev replied 1 year ago.
It is hard to say whether you will have benefits over such large time period because so many thing are hard to predict including possible law change.Getting married will also allow spousal social security benefits, etc.Regarding expected saving on mortgage interest - it woudl hard to compare today's dollar value with the value 30 years from now - we need to add inflation component.But you definitely may have some saving on the mortgage interest.