Has anyone used any particular tax software that handles this 941 deduction well for small business owners? I tried using TurboTax Small Business last year and it was super confusing with my payroll taxes.

Great question! I just went through this exact situation with my LLC last year. Yes, the employer portion of your 941 payroll taxes is definitely deductible on Schedule C. Here's what I learned: You can deduct the employer's share of Social Security (6.2%), Medicare (1.45%), FUTA, and any state unemployment taxes you paid. For your $2,100 in quarterly taxes, a good chunk of that should be deductible - just make sure you're only counting the employer portion, not the employee withholdings. I put mine on Line 23 "Taxes and licenses" on Schedule C. One thing that helped me was creating a simple spreadsheet to track the employer vs employee portions each quarter, since the 941 form shows everything together. Your payroll service should be able to give you a breakdown if you don't already have one. Also, don't forget about any state payroll taxes you paid - those are deductible too if they're the employer portion. Just keep good records of all your payroll tax payments and forms in case the IRS ever asks for documentation.

Don't forget about local taxes too! Some cities and counties have their own income taxes that you need to withhold for employees working there. I completely missed this for my employee in Ohio and had to deal with penalties. New York City, Philadelphia, San Francisco, and many Ohio and Pennsylvania municipalities have local income taxes. It's not enough to just register with the state - you need to check if there are local tax obligations too.

This is incredibly helpful information! I had no idea about the local tax requirements - that's definitely something I need to research for my remote employees. One thing I'm curious about is timing. If I have employees who started working remotely in different states earlier this year, but I haven't set up the state withholdings yet, what's the best way to handle catching up? Do I need to go back and calculate what should have been withheld from previous paychecks and make up those payments to the states? Or is there a way to just start fresh from the current payroll period going forward? I'm worried I might already be behind on some compliance requirements and want to make sure I handle this correctly to avoid penalties.

This thread has been incredibly helpful! I'm dealing with a similar situation with my first rental property purchase from last month. One thing I'd add based on my research is that the IRS Publication 527 (Residential Rental Property) specifically addresses this "placed in service" concept. What I found particularly useful was the distinction between startup costs (which may need to be amortized over 15 years) versus ordinary repair expenses (which can be deducted immediately). For example, if you're fixing existing issues to make the property rentable, those are generally repairs. But if you're adding new features or significantly upgrading systems, those would be improvements. I've been keeping a detailed spreadsheet categorizing each expense and the reason for it (e.g., "Fixed leaky faucet in kitchen - necessary for property to be rentable" vs "Upgraded to granite countertops - improvement"). This level of documentation should help support my position if there are ever any questions. The timeline approach that several people mentioned here is spot-on. I started my "available for rent" marketing about 2 weeks after purchase, even though I knew I'd need another month of repairs. Having that documented intent to rent seems to be the key factor in establishing when the property is considered "in service.

I've been following this discussion as someone who just went through a similar situation with my rental property purchase earlier this year. One thing that really helped me was understanding that the IRS actually has different rules for different types of pre-rental expenses, and it's not just a simple "before vs. after" distinction. What I learned from my tax attorney is that there are essentially three categories of pre-rental expenses: 1. **Ordinary repairs to make property rentable** - These can usually be deducted immediately if you can show active rental preparation 2. **Capital improvements** - Must be depreciated over 27.5 years regardless of timing 3. **Business startup costs** - May qualify for immediate deduction up to $5,000 with remaining amounts amortized over 15 years For your $3,700 in repairs, the key question isn't just timing but also whether these expenses fall into category 1 or 2. Fixing roof leaks and patching drywall to restore the property to rentable condition would typically be category 1 (immediately deductible), while something like installing a new HVAC system would be category 2 (must be depreciated). The documentation strategies everyone mentioned here are crucial, but also consider getting a second opinion from a CPA who specializes in rental properties. Some general practice accountants tend to be overly conservative on rental property issues because they don't deal with them as frequently. I ended up saving about $1,800 in taxes by properly categorizing my pre-rental expenses instead of capitalizing everything my original accountant suggested.

Just wanted to add that with $45k income you should definitely file your own taxes regardless of the FAFSA situation. Your parents can't claim you as a dependent with that income level unless they're still providing over half your total support (including housing, food, education, medical, etc.).

As someone who works in financial aid at a university, I want to emphasize a few key points that might help clarify things: 1. **Tax filing vs FAFSA dependency are completely separate** - this can't be stressed enough. You can (and probably should) file your own tax return with $45k income, but you'll still be considered a dependent student for FAFSA purposes until you're 24. 2. **The support test is tricky** - it's not just about income, but total support including tuition, room/board, food, medical expenses, etc. If your parents are paying for college expenses, they might still be providing over 50% of your total support even with your $45k income. 3. **Don't forget about estimated taxes** - with that jump in income, make sure you're not going to owe penalties for underpayment. If most of your $39k internship income wasn't subject to withholding, you might need to make quarterly payments. I'd recommend meeting with both a tax professional AND your college's financial aid office. They can walk through the numbers with you and help you understand the implications for both your tax situation and your aid eligibility. Every situation is unique, especially when you're transitioning from low income to higher income mid-college.

Are property taxes and mortgage interest part of the "closing costs" we're talking about for basis calculation? I paid about $3k in prorated property taxes at closing when I bought my house in 2021. It's a rental now as of last month.

Just want to add my experience for anyone else dealing with this situation. I converted my personal residence to a rental in 2022 and was also confused about the basis calculation. After consulting with my CPA, I learned that you definitely CAN include those original closing costs (real estate commission, title insurance, attorney fees, etc.) in your depreciable basis, even though the property wasn't initially purchased as a rental. The key thing to remember is that when you convert to rental use, your basis is the LOWER of either your adjusted basis (original cost plus improvements minus any casualty losses) OR the fair market value at the time of conversion. So if your property appreciated significantly, you might be limited by the FMV rather than your original costs. I kept all my original closing documents from 2019 and my CPA was able to add about $8,000 in closing costs to my basis calculation. Make sure you have documentation for everything - the IRS will want to see proof of those costs if they ever audit your depreciation schedule.