Am I Missing Something?

Category: 
Feb 20 2018 - 9:50am

Sorry that this is going to be complicated! :) My husband was a fairly new immigrant when he had a devastating accident (hit by another driver, with not enough insurance or wherewithal to help my husband) with major life-changing injuries (lost a leg to the hip, shattered his pelvis, his foot, an arm, his coccyx, his sternum, internal bleeding, etc. although luckily no brain injury or paralysis). He was a green card holder but had only 13 credits at the time and so could not get SSDI. Since then, he has been running his own company but not making enough to really pay himself or pay into the system and so has finally decided it is too much given his medical issues, and has closed it down, although he is only 47 years old. Meanwhile, I am 60 years old, have been the breadwinner and I am hoping to retire at 67. Our real worry is the gap during which we will no longer get healthcare through my employer, and I am eligible for Medicare, and he is not. I know that I will probably make too much to get subsidies, and so his individual health insurance will cost a fortune each month - which will put a real crimp in any retirement plans. So we were thinking -- we have a two family house, for which he already does the maintenance. We set up an LLC which collects the rent from the tenants, and pays him $500 a month as the maintenance man. We pay taxes and social security/medicare etc. on that. When he has collected enough credits (which will be around the time I retire) he finally throws in the towel as being in too much pain to continue working -- which will be totally legitimate and true. Then he will be eligible for SSDI. Two years later he qualifies for Medicare. Does that make sense? Am I missing something? Is there any easier way to close that gap? Are there any other benefits we're not thinking of?

Hi,

I don't know of any benefits that you're overlooking, but my only area of expertise is Social Security.

Your plan for getting your husband the quarters of coverage that he needs for insured status sounds sketchy to me. In order for rental income to be considered as earnings, it must either be received:
a) In the course of a trade or business as a real estate dealer;
b) For the use or occupancy of rooms or other space where services are rendered primarily for the occupant; or,
c) By a landlord who has an agreement with a farmer tenant in which the landlord materially participates.

What is meant by 'services rendered' in item b) above are services provided on a regular basis, such as those performed by maids in a hotel (https://secure.ssa.gov/apps10/poms.nsf/lnx/0301803624). It doesn't sound like the services that your husband performs for your tenants would qualify under that definition.

However, I'm not a lawyer or tax expert so I don't really know if you could justify reporting this income as earnings for your husband by filtering it through a corporation. Like I said, I just think it sounds sketchy. That said, both the IRS and Social Security are understaffed these days so who knows whether or not they would ever take the time to question whatever you report on your tax returns.

Best, Jerry