Husband-and-Wife LLCs: Filing Requirements Explained

Many married couples form LLCs to hold rental properties for liability protection. However, this structure often comes with additional tax filing requirements.

By default, the IRS treats a two-member LLC as a partnership, requiring the filing of Form 1065 and issuance of Schedule K-1s. While “mere co-ownership” of property may avoid partnership treatment, this does not apply once the property is held within an LLC.

The qualified joint venture election—which allows simplified reporting—does not apply to LLCs. However, couples in community property states may have the option to treat the LLC as a disregarded entity and file a single Schedule E.

Before forming an LLC, it is important to balance liability protection with increased tax compliance obligations.

Expanded Employer Childcare Credit in 2026

The One Big Beautiful Bill Act (OBBBA) significantly enhances the employer childcare credit beginning in 2026, creating valuable opportunities for businesses.

Key highlights:

• Small businesses: 50% credit, up to $600,000 annually
• Large businesses: 40% credit, up to $500,000 annually
• Businesses may collaborate or pool resources to provide childcare services

Eligible expenses include on-site facilities, third-party providers, and referral services. Notably, businesses do not need to operate their own childcare centers to qualify.

This expanded credit applies to a wide range of entities, including sole proprietors, partnerships, LLCs, and S corporations. Employers offering childcare support should evaluate this opportunity carefully to maximize tax savings.

QCD Rules: Avoid a Costly Mistake

Qualified Charitable Distributions (QCDs) allow IRA owners to support charities while reducing taxable income. However, strict rules apply.

To qualify as tax-free:

• Funds must be transferred directly to a qualified charity
• The donor must receive no material benefit in return

Even minimal benefits—such as event tickets—can cause the entire distribution to become taxable.

Careful planning and proper documentation are essential to preserve the tax advantages of QCDs.

Related-Party Transactions: Hidden Tax Risks

Transactions between family members or related entities can trigger unexpected tax consequences under Internal Revenue Code Section 267.

This provision may:

• Disallow losses on sales between related parties
• Delay deductions until income is recognized by the other party
• Apply complex ownership attribution rules

Taxpayers should review ownership structures and relationships carefully before entering into transactions to avoid unintended outcomes.

Bicycle Commuting Deduction Eliminated

The OBBBA has permanently eliminated the federal tax benefit for bicycle commuting.

Beginning in 2026:

• Employer reimbursements for bicycle commuting are fully taxable to employees
• Employers can no longer deduct these expenses

While other transportation benefits remain available, this change removes a previously tax-efficient option for both employers and employees.

Tax laws continue to evolve, and even minor procedural changes can have significant financial consequences. Staying informed and taking proactive steps can help ensure compliance while maximizing available tax benefits.

If you have questions about how these updates may impact your situation or would like assistance with tax planning, our team is here to help.

Contact us today to ensure you are taking full advantage of available opportunities while staying compliant with the latest regulations.