This confused me too last year! Here's what I learned: Standard deduction has NOTHING to do with MAGI. MAGI calculations happen BEFORE any standard or itemized deductions are applied. The sequence is: 1. Calculate total income 2. Subtract adjustments (IRA contributions, student loan interest, etc.) = AGI 3. Add back certain adjustments (like IRA contributions) = MAGI 4. THEN later you subtract standard/itemized deductions to get taxable income So no, MAGI is definitely not AGI plus all deductions. It's more like AGI plus SELECTED adjustments added back in.

Just wanted to share my experience as someone who went through this exact confusion last year! The key thing that helped me was understanding that MAGI isn't a single calculation - it changes depending on what you're using it for. For your specific situation with the health insurance marketplace, your MAGI will be your AGI ($42,300 after the IRA deduction) PLUS your traditional IRA contribution ($5,200) = $47,500. This is exactly what your tax software is showing you. The reason this matters for your premium tax credit eligibility is that the government wants to see your "true" income capacity before retirement savings, since theoretically you could choose not to contribute to an IRA and have that money available for health insurance premiums instead. At $47,500 income, you should definitely qualify for some level of premium tax credit depending on your location and the plans available. The credit phases out completely around $60,240 for a single person in 2024, so you're well within the eligibility range. Make sure to use the healthcare.gov calculator with your MAGI figure to get an accurate estimate of your subsidy!

Don't overlook state tax implications in whatever you decide! Some states don't recognize S corps the same way the federal government does, and others have additional fees or taxes for different entity types. California, for example, has an $800 minimum franchise tax for LLCs and S-Corps alike. If you tell us what state you're in, you might get more specific advice. The 5-year waiting period is definitely a federal rule, but your best alternative structure might depend partly on state considerations.

This is a tough situation, but you're not completely out of options. The 5-year waiting period is indeed strict, but I've seen a few successful approaches: First, definitely document everything about your business transition from side-gig to full-time. The IRS sometimes considers substantial changes in business circumstances when evaluating private letter ruling requests. Your shift from $22k hobby income to $90k primary income could be compelling evidence. Second, consider whether your original revocation was truly "voluntary" or if you were acting on incomplete information. If you can demonstrate that you didn't fully understand the consequences or didn't receive proper professional guidance, you might have grounds for relief under Revenue Procedure 2013-30. Third, look into whether forming a new entity makes sense for legitimate business reasons beyond just tax elections. If you're adding partners, significantly changing your business model, or expanding into new markets, a new LLC might be defensible. Finally, don't forget about interim tax strategies while you work through this. You can still maximize retirement contributions, consider a solo 401(k), and potentially hire family members to shift some income and reduce self-employment taxes. I'd strongly recommend getting a consultation with a tax attorney or CPA who specializes in entity elections before making any major moves. This situation is complex enough that professional guidance is worth the investment.

Just to add a practical perspective from someone who's been through this - I've been receiving money from my grandparents in Germany for years (around $20-30k annually) and have never had any tax issues. I invest about half of it in index funds. The only complication I ever ran into was when I crossed the $10k threshold in a single transfer, which triggered a currency transaction report by the bank. That's not a tax form - it's just an automatic report banks file for large transfers. Didn't affect me at all, but it did freak me out when the bank called to ask questions!

As someone who works in international tax compliance, I want to emphasize a few key points that might help clarify your situation: 1. **Gifts vs. Income**: The money your parents send you is considered a gift, not taxable income, regardless of whether you use it for living expenses or investments. The IRS cares about the nature of the transfer, not how you spend it afterward. 2. **Investment Gains**: While the gift itself isn't taxable, any profits you make from investing that money will be subject to capital gains tax when you sell. Keep good records of your cost basis for tax purposes. 3. **Documentation**: Even though you're under the $100k reporting threshold, I'd recommend keeping records of the transfers (bank statements, wire transfer receipts) and perhaps a simple letter from your parents stating these are gifts for educational/living expenses. This creates a clear paper trail if questions ever arise. 4. **State Considerations**: Don't forget to check if your state has any additional reporting requirements for foreign gifts, though most follow federal guidelines. Your $24k annual amount is well below any reporting thresholds, so you should be in the clear from a compliance standpoint. The key is maintaining good documentation and understanding that investment gains from gifted money are still taxable as investment income.

Some tax offices offer a "self-preparer" package where you can use their professional software but do the work yourself. I did this last year for my extended family - paid $150 for access to professional software that let me prepare unlimited returns. Each return still had e-filing fees ($25 each in my case), but it was WAY cheaper than hiring a pro for each return. Check with local tax offices in your area - many offer this in the off-season (summer/fall) at discounted rates. They technically review the returns before filing, but it's minimal if you know what you're doing.

Have you considered setting up a shared Dropbox or Google Drive folder where everyone uploads their documents? That's what I did for my family - created a secure folder structure for each person, had them upload docs throughout the year, then I blocked off a weekend to do all the returns using FreeTaxUSA. Way more efficient than doing them one by one with each person present.

One thing nobody mentioned yet - make sure you're keeping the receipts for concert tickets separate from other entertainment expenses. The IRS looks closely at entertainment deductions and they're tricky for content creators. For your concert tickets, you should document: 1. Date and venue 2. What content you produced from it (link to the review) 3. How it directly relates to your business I learned this the hard way when I got audited for my travel blog. They questioned every meal and event ticket until I could prove it was directly tied to content I published.

Great advice from everyone here! I'm actually a CPA and wanted to add a few important points that might help Diego and others in similar situations. First, since you're making $2,800/month consistently, you definitely need to make quarterly estimated tax payments. The general rule is if you expect to owe $1,000 or more in taxes, you need to pay quarterly. Calculate 25-30% of your net profit and pay that quarterly to avoid underpayment penalties. For the home office deduction, be careful - it needs to be a space used EXCLUSIVELY for business. If you edit in your living room sometimes, that doesn't qualify. But if you have a dedicated room or corner that's only for filming/editing, you can deduct that percentage of your rent, utilities, etc. Also, consider setting up an LLC or S-Corp election once your income grows more. Right now you're paying both sides of Social Security/Medicare tax (15.3% total), but there are legitimate ways to reduce some of that burden as your business grows. Keep meticulous records of everything - the IRS loves to audit content creators because the line between business and personal expenses can be blurry. Document the business purpose for every expense, especially entertainment-related ones like concert tickets.