🚀Dual income engines, one powerhouse household

☕ Good morning SenseMakers!

If your household prints two strong incomes, say one from a 9-to-5 W-2 and another from a thriving solopreneur business, you’re navigating multi-system tax warfare. 

Most people play checkers here, but I want to help you play 4D chess. 

Today, I’m giving aspiring dual-income powerhouse households the toolbox to play offense: smarter entities, deeper retirement stacking, and income choreography that functions like a stealth family office.

🧱 Entity Alchemy: Structuring Around the Tax Code

LLCs are easy. 

But easy doesn’t scale. You can't brute-force tax efficiency with default settings, especially not when one spouse’s high W-2 kills QBI deductions for the business side.

Many small businesses start as a sole proprietorship or single-member LLC, which is simple and has income “pass through” to your personal return (no entity-level tax), but all the net profit is subject to FICA (self-employment) taxes (15.3% for Social Security and Medicare combined). 

Take Lena and Marcus. She’s a cardiologist ($460K W-2). He’s running a marketing LLC putting up $200K net. On paper, great. 

In practice? Brutal.

Without strategic entity design, Marcus is paying a full 15.3% self-employment tax and gets zero 199A QBI deduction, shredded by Lena’s income. 

The QBI deduction is fully phased out at $483,90, and Lena and Marcus’s combined income ($660k) means Marcus’s entire $40K QBI deduction vanishes.

Instead, elect to use an S-Corp. Pay a salary to Marcus ($80K) and take the rest as S-Corp dividends ($120K). That alone reduces FICA by over $18,000 annually (assuming the IRS agrees that $80K is a “reasonable salary.”)

The couple could also revisit ownership. A 49/51 split between spouses can pivot qualification status for QBI. Play with wage allocations, not just ownership percentages.

Don’t design entities in isolation. Design to win at the household level, where taxable income lives or dies.

💰 Retirement x2: Stack Contributions Like a Boss

You’ve got two lanes: employer-sponsored retirement and business-owner retirement. 

Here’s how to use both strategically. 

Brandon crushes his 401(k) from his Big Tech job. His wife, Dana, runs a design biz, bringing $130K after expenses. A common mistake is thinking retirement maxes out at $22,500, the employee contribution limit. 

As employer, Dana can tack on a second layer: up to 20% of her net income. That’s $26K into the solo 401(k), on top of Brandon's contributions. 

The next level? Layer in a cash balance defined benefit plan. Dana could theoretically defer $130K to $200K+ in a high-income year, creating an absolute retirement rocket. (Just don’t touch this without your financial planner on speed dial.)

Just make sure you’re coordinating across vehicles so your tax-deferred dollars don’t bottleneck in one account type. 

📉 Income Compression: Turn Tax Code Into a Payout Machine

High earners surf the edge of tax brackets, phasing out credits, deductions, even QBI. 

But with precision income placement, you reclaim control.

For example, if the business pays your W-2 spouse just enough to trigger a QBI wage threshold, without pushing into a higher bracket, you unlock a “wage-based” deduction and open 401(k) access for that spouse. 

Got one spouse on parental leave or sabbatical? Shift passive income that year. More rental income, dividends, or capital gains to the lower earner. The tax rate on $50K passive may be 2$ to 4% lower, year after year. 

Don’t sleep on traps like the Alternative Minimum Tax. When SALT deductions disappear, and incentive stock options (ISOs) are involved, taxable income can jump when you least expect it. Run AMT simulations like it’s part of your quarterly close.

🎥 Watch: Turning Dual Incomes into a Tax-Efficient Machine

If one of you is W-2 and the other runs a business, you’re not just earning more, you’re triggering a tax code minefield. 

In this quick video, I walk through how high-earning couples can coordinate across both income streams like a stealth family office.

🧠 Making Sense of the Dual-Income Playbook

You’re not just married, you’re tax-married.

Household tax planning means paying attention to where phaseouts begin to bite. Once your AGI crosses $200K to $400K, credits and deductions start quietly ghosting you. Child Tax Credit? Gone. QBI deduction? Vaporized if you’re not proactive.

That’s not just a “oh well, we’ll try more next year.” It’s that family vacation to Italy, or that full-year travel sabbatical. 

The list of levers you can pull as a high-earning couple is too long for one newsletter, and the best moves depend on your income mix, entity setup, and goals. If you want help untangling it all, I’d love to talk. 

At its core, this playbook is system engineering; every entity, contribution, and dollar of income has an intention behind it. 

When both spouses are pulling heavyweight incomes from different ecosystems (corporate wages, entrepreneurial profits, passive income investments), you either let the complexity bleed you out every tax season, or you coordinate to get the absolute most you legally can. 

This is how you keep more compound faster, and build a legacy the IRS can't touch.

As always, I hope this helps you to Prioritize Your Version of a Rich Life.

Until next week!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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