Regarding question #3 about capital gains - be careful here. Yes, you can still claim the primary residence exclusion when you sell ($250k/$500k), BUT any depreciation you've taken must be "recaptured" and taxed at 25% when you sell, regardless of the exclusion. This catches a lot of people by surprise! So if you've taken $20k in depreciation deductions over the years, you'll owe $5k (25% of $20k) when you sell, even if the sale would otherwise be fully excluded from capital gains tax.

One thing I'd add to all this great advice - make sure you're keeping really detailed records of everything! I learned this the hard way when I got audited on my room rental situation. Keep receipts for all your expenses (utilities, insurance, maintenance, etc.), track exactly how much rent you collect each month, and document the square footage or room allocation you're using for your deductions. I created a simple spreadsheet to track monthly rental income and expenses, and took photos of the rented rooms with measurements. Also, consider opening a separate bank account for your rental income and expenses - it makes everything much cleaner come tax time. The IRS loves good documentation, and if you ever get questioned about your deductions, having everything organized will save you a lot of headaches. The depreciation recapture issue that @b7a3f4da667a mentioned is real, but don't let it scare you away from taking the deduction. The tax savings now usually outweigh the recapture cost later, especially with inflation. Just factor it into your long-term planning!

One thing nobody's mentioned yet is the small contractor exception that exists in some states. If your annual revenue is under certain thresholds (varies by state, usually $100k-500k), you might qualify for simplified reporting or even exemptions. I'd also recommend joining your local builders association if you haven't already. Ours provides members with updated tax guidance documents specific to our state, and they even host quarterly seminars with tax professionals to cover changes. Way cheaper than paying for individual consulting.

As someone who's been dealing with multi-state construction tax compliance for over a decade, I completely understand your frustration! The complexity is real, and it only gets worse as you grow. One critical point I'd add to the excellent advice already given: don't forget about use tax obligations. This is where many contractors get tripped up during audits. When you purchase materials tax-free with an exemption certificate but then use them in taxable work, you often owe use tax to the state where the work is performed. Also, keep detailed records of your contracts and change orders. Tax authorities love to scrutinize whether work should be classified as repair/maintenance versus capital improvements, and having clear documentation of the scope can save you thousands in disputed assessments. For immediate relief while you're figuring out long-term solutions, consider getting registered for voluntary disclosure programs in your operating states. This can help you get compliant without penalties for past periods where you may have missed requirements. Most states offer these programs, and they're much better than waiting for an audit to find issues. The learning curve is steep, but once you get systems in place, it becomes much more manageable. Don't try to handle everything manually at your current scale - you'll burn out and make costly mistakes.

Great thread! I'm in a similar position with my freelance graphic design business. Made about $38k last year and have been doing my own taxes with TurboTax, but I know I'm probably missing deductions. One thing I learned the hard way - make sure whatever service you choose understands creative businesses. I tried H&R Block last year and the preparer had no clue about things like client entertainment expenses, portfolio development costs, or software subscriptions that are legitimate business expenses for creative work. For photography specifically, don't forget about travel expenses for shoots, backup equipment storage, and even things like professional development courses. A good tax person who knows your industry will catch these things that general preparers often miss.

I've been following this discussion and wanted to share my experience as a wedding photographer who went through a similar decision process last year. I was making around $55k and felt overwhelmed by all the tax advice out there. I ended up working with a local CPA who specializes in creative businesses, and it made a huge difference. She caught deductions I never would have thought of - things like the percentage of my car insurance that's deductible for travel to shoots, equipment insurance, even part of my cell phone bill since I use it for client communication. The key was finding someone who actually understands photography as a business. She knew about things like model release fees, location scouting expenses, and even the cost of maintaining a professional portfolio website. These industry-specific deductions added up to about $3,200 in additional write-offs compared to what I was doing on my own. For what it's worth, she told me that at my income level, an S-Corp election wouldn't save much on self-employment taxes yet, but definitely something to consider once I hit around $70-80k consistently. Much more affordable than the Tax Hive quotes I got, and the personal relationship means I can call with questions throughout the year.

Has anyone used TurboSelf-Employed for this sort of thing? I'm in a similar situation with my podcast income and wondering if regular tax software can handle it or if I need something specialized.

I had a very similar experience with a community theater production I directed last year! One thing that really helped me was creating a simple spreadsheet to track all the money flows - the 1099 income coming in, payments going out to partners and cast, and any other production expenses. This made it much easier to organize everything for Schedule C. Also, don't stress too much about not issuing 1099s to your actors for payments under $600 - that's completely normal and you're not required to. Just make sure you have records of who you paid and when (like copies of the checks or bank records). The key thing to remember is that the IRS expects you to report the full 1099 amount as income, but then you get to deduct all your legitimate business expenses against it. So your actual taxable income will be much less than that $3,245. Keep all your documentation organized - agreements with the partner theater, proof of payments, receipts for any other production costs. You've got this!

This thread has been incredibly eye-opening! I've been running my small photography business for about 2 years and had losses both years (around $3,400 last year and $5,200 this year). My tax preparer just treated them as hobby losses and said I could only deduct up to my business income, which was basically nothing. After reading everyone's experiences here, I'm realizing I might have legitimate business losses that could be carried forward. I keep detailed records, have business insurance, maintain a separate business bank account, and actively market my services - so I think I can demonstrate this is a real business, not just a hobby. I'm definitely going to have a serious conversation with my tax preparer about amending my returns and properly documenting these losses for carryforward. It sounds like I might be able to recover some significant money from previous years and set myself up better for when the business becomes profitable. Has anyone dealt specifically with photography businesses and the hobby vs. business determination? I'm wondering if there are any industry-specific things I should be documenting to prove business intent.

I've been following this discussion and wanted to share my experience with carrying forward losses from my consulting business. Last year I had a $12,400 loss due to some major software purchases and certification courses, and I was initially told by my tax preparer that I could only use it to offset other income that year. After doing some research (and finding threads like this one), I discovered that the remaining $8,600 could be carried forward as a Net Operating Loss. What really helped me was creating a detailed business plan that showed my investment strategy and projected profitability timeline - this documentation was crucial when I amended my return. One thing I learned is that it's important to track not just the dollar amounts, but also the business rationale behind your expenses. The IRS wants to see that your losses are part of a legitimate business strategy, not just random spending. I now keep a business journal documenting major purchases and how they relate to growing my revenue. For anyone considering amending previous returns to claim NOL carryforwards - it's definitely worth it if you have the documentation. I ended up getting back about $2,100 from my amended return, and now I have the remaining loss amount properly set up to reduce taxes in future profitable years.