How to file taxes when one spouse is a business owner - joint or separate?

My wife runs her own business (sole proprietorship) and we've got some tax questions. Last year we did married filing separate, but I'm wondering if filing jointly might save us some money this year. Her business has been doing better - she made about $67,000 last year while I earned $81,000 at my regular job. I'm trying to figure out what the advantages might be if we file jointly instead. Are there tax breaks we're missing out on? Or could filing jointly cause problems with her business taxes? We don't have kids or major deductions besides our mortgage. Anyone with experience in this situation who can break down the pros and cons? Really appreciate any advice!

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22 comments

Khalid Howes

•8M

Filing jointly typically offers several advantages over filing separately for most couples, especially when one spouse is a business owner. The benefits of filing jointly include: higher standard deduction ($27,700 for 2025 vs $13,850 for MFS), access to certain tax credits that aren't available when filing separately (like education credits, child tax credits, and earned income credit), potentially lower overall tax bracket, and the ability to offset business losses against other income. The drawbacks are mainly around liability - when you file jointly, both spouses are responsible for the accuracy of the return and any tax due. If your wife's business involves any audit risk, that's something to consider. Without knowing your complete financial picture, I'd recommend running the numbers both ways before deciding. The difference can be significant, especially with the income levels you mentioned.

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Khalid Howes

•8M

The home office deduction is available regardless of filing status, so your spouse can still claim it when filing jointly. The calculation is based on the business use of your home, not on your filing status. Filing jointly means you're both responsible for the accuracy of the tax return and any tax liability arising from it. However, this doesn't extend to business debts outside of tax liabilities. If the business has non-tax debts, those generally remain with the business owner unless you've personally guaranteed them or live in a community property state.

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Naila Gordon

•8M

After struggling with a similar situation (my husband has a construction business), I found taxr.ai at https://taxr.ai and it was a game-changer for us. We'd been filing separately for years thinking it was better for his business, but the software analyzed our last three years of returns and showed we'd actually overpaid by filing separately! It specifically looked at how the QBI deduction would work differently with joint vs separate and factored in our specific situation with the business income.

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Naila Gordon

•8M

The audit flag concern is something it definitely addressed! It explained that changing filing status by itself isn't an audit trigger - the IRS understands life circumstances change. What matters is that you're consistently reporting all income accurately. Self-employment taxes remain the same regardless of filing status - that's a completely separate calculation from income tax. The service showed us that while SE taxes wouldn't change, our overall tax burden was lower filing jointly because of how the income tax brackets worked with our combined income.

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Cynthia Love

•8M

Just wanted to update after trying taxr.ai based on the recommendation here. Our situation is similar - my wife has a photography business and I work corporate. The analysis showed we'd save around $3,200 by filing jointly instead of separately! Biggest factor was that filing separately had pushed me into a higher bracket for my investment income, plus we weren't eligible for some credits. Taking the plunge and filing jointly this year, and it was worth every penny to get that personalized analysis.

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Rosie Harper

•8M

If you're still trying to get clarity on this, I'd recommend actually talking to the IRS directly. After spending weeks trying to get someone on the phone about how my wife's business affected our filing status, I found Claimyr at https://claimyr.com which got me connected to an actual IRS agent in less than 20 minutes! You can see how it works at https://youtu.be/_kiP6q8DX5c. The agent walked me through exactly how joint filing would impact our specific situation and confirmed we wouldn't have any issues switching our filing status from last year.

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Rosie Harper

•8M

It works by essentially waiting on hold for you. You register your number, then their system waits in the IRS queue and calls you when an agent is about to be connected. So instead of you waiting on hold for hours, their system does it for you. The difference is huge. Instead of being stuck on hold unable to do anything else (or giving up after an hour), you just go about your day until they call you when an agent is ready. For me, I submitted my request in the morning and got connected that afternoon while I was able to keep working.

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Demi Hall

•8M

Well I stand corrected. After being super skeptical I decided to try Claimyr since I was desperate to get an answer about reporting my wife's business income. Got a call back in about 35 minutes (way faster than I expected) and talked to an actual IRS rep who explained exactly how the Qualified Business Income deduction works with joint returns vs separate. Turns out we were leaving money on the table by filing separately! The agent confirmed we can switch to joint filing without any issues. Saved me from making the same mistake again this year.

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Mateusius Townsend

•8M

The QBI deduction (aka Section 199A deduction) allows eligible self-employed and small business owners to deduct up to 20% of their qualified business income. But there's a phase-out that begins when taxable income exceeds $340,100 for joint filers and $170,050 for separate filers in 2025. If your business is in a "specified service trade or business" (like consulting, health, law, finance, etc.), the deduction gradually reduces once you hit those thresholds and disappears completely at $440,100 joint/$220,050 separate. If your wife's business isn't in those categories, different limitations based on W-2 wages and business property kick in instead.

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Omar Farouk

•4M

Great question! I was in almost the exact same situation last year - my husband has a small business and I work a regular W-2 job. We switched from filing separately to jointly and saved about $2,800. The key things that helped us were: the higher standard deduction for joint filers, better tax brackets on our combined income, and access to education credits we couldn't get filing separately. Plus, his business qualified for the QBI deduction which worked out better with our joint income. One thing to watch out for - if your wife's business has any irregular expenses or potential audit issues, filing jointly does mean you're both liable for any problems. But for most legitimate businesses, this isn't a real concern. I'd definitely recommend running the numbers both ways before deciding. Most tax software will let you see both scenarios before you file. In your income range, joint filing usually comes out ahead unless there are some unusual circumstances.

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Christian Burns

•3M

For education credits, filing jointly does make you eligible for credits like the American Opportunity Credit and Lifetime Learning Credit that aren't available when filing separately. But you still need to meet other requirements - like being enrolled in an eligible program, not exceeding income limits, etc. The income limits are much higher for joint filers though, which is why it often works better. As for business "red flags" - I'm thinking things like unusually high meal/entertainment deductions, excessive home office claims, or business expenses that look more personal (like claiming a family vacation as a business trip). If your wife's business has straightforward, well-documented expenses, filing jointly shouldn't be a concern. The liability issue is more about if there's ever a dispute about whether expenses were legitimate business costs. @f8a45d51ebc4 - did you guys run into any issues when you switched from separate to joint filing? I'm always worried the IRS will question why we changed.

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Honorah King

•2M

I've been following this thread with interest since my situation is very similar! My spouse runs a small graphic design business as a sole proprietor, and we've been filing separately for the past three years thinking it would protect my income from any potential business issues. After reading all these responses, I'm realizing we might be leaving money on the table. The QBI deduction discussion was especially eye-opening - I had no idea that could work differently with joint vs separate filing. One question I haven't seen addressed yet: if we decide to switch to joint filing this year, do we need to amend our previous returns too, or can we just start fresh with this year's return? Also, are there any deadlines we should be aware of for making this decision? Thanks to everyone who's shared their experiences - this has been incredibly helpful for those of us navigating business ownership within a marriage!

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