I think most people are overthinking this. I've been running a home catering business for 12 years and here's what my CPA told me: Take the total square footage of your home, figure out what percentage your kitchen represents, then determine what percentage of time the kitchen is used for business vs. personal. Example: If your kitchen is 15% of your home's square footage, and you use it 70% for business, you can deduct 10.5% (15% × 70%) of your home expenses like mortgage interest, property taxes, utilities, insurance, etc. For major renovations, you can depreciate the business portion. In your case, if the renovation costs $32,000, you'd depreciate $3,360 (10.5% of $32,000) over 27.5 years. For appliances specifically used for business, you can depreciate them separately over 5-7 years, or potentially use Section 179 to deduct them immediately. It's not that complicated if you keep good records. I've been through an audit and this approach held up fine.

Great insights from everyone here! As someone who's dealt with similar home business kitchen deductions, I'd add that documentation is absolutely crucial. The IRS loves to see contemporaneous records, so start tracking your business vs personal kitchen usage RIGHT NOW, even before you do the renovation. I recommend creating a simple log where you note the time spent on business activities in the kitchen each day. Also take "before" photos of your current setup and detailed "after" photos once the renovation is complete, showing which areas and equipment are used primarily for business. One thing I learned the hard way: if you're installing any new electrical, plumbing, or ventilation specifically required for commercial-grade equipment, those costs can often be fully allocated to business use rather than using the general percentage approach. My electrician had to upgrade my panel and add dedicated circuits for my commercial convection oven - that was 100% business expense. Also consider timing - if you're expecting a particularly profitable year, taking the Section 179 deduction for qualifying equipment might make more sense than depreciating over time. But if your business income varies significantly year to year, spreading the deduction through depreciation might provide more consistent tax benefits.

Has anyone used a Charitable Remainder Trust for this kind of situation? My cousin mentioned it might help with capital gains but I don't really understand how it works.

One strategy you might want to consider is installment sale treatment if you're willing to finance part of the sale yourself. Instead of receiving the full $3.2 million upfront, you could structure the deal so the buyer pays you over several years. This spreads the capital gains tax over multiple years, potentially keeping you in lower tax brackets each year rather than taking the full hit in one tax year. You can still exclude your $500k in the year of sale, but the remaining gain gets recognized proportionally as you receive payments. This works especially well if you're near retirement or expect to be in lower tax brackets in future years. Just make sure the buyer is creditworthy since you'd essentially be acting as their lender. You'll also earn interest on the outstanding balance, which provides additional income but is taxed as ordinary income rather than capital gains. The other thing I'd strongly recommend is consulting with a tax attorney or CPA who specializes in large capital gains transactions. With $2.7 million in taxable gain, even small percentage savings from proper planning could save you tens of thousands in taxes.

I messed up last year and filed the wrong form for my cousin with TPS. We used 1040NR instead of 1040 even though he met the substantial presence test. Will he get in trouble for this? Should we file an amended return?

This is such valuable information for anyone with TPS status! I went through a similar situation last year and can confirm that meeting the Substantial Presence Test is indeed the key factor for filing as a resident alien, regardless of your specific immigration status. One additional tip for your colleague: when using online tax software, they should look for the question about "How long have you been a U.S. resident for tax purposes?" rather than getting confused by immigration status questions. Most software will guide them to resident alien filing if they indicate they've been in the U.S. for the required time period. Also, it's worth noting that as a resident alien, they'll be able to claim the standard deduction and potentially qualify for refundable credits like the Earned Income Tax Credit if their income qualifies. This is often much more beneficial than the limited deductions available to nonresident aliens. The transition from F1 to TPS actually works in their favor here since F1 students have that 5-year exemption from the substantial presence test, but TPS holders don't have any such exemption - so the test applies normally and they can file as residents once they meet it.

Anyone have experience with claiming professional development stuff? I took some online courses to learn new design software and wondering if I can deduct those?

Great question! As someone who's been self-employed for 5 years, I've learned the hard way about keeping meticulous records. Here are the key deductions you should definitely be tracking: **Home Office**: Since you work from home 75% of the time, measure your dedicated workspace and calculate the percentage of your home it represents. You can deduct that percentage of rent, utilities, renters/homeowners insurance, and maintenance costs. The space must be used exclusively for business though. **Equipment & Software**: All your graphic design software subscriptions (Adobe Creative Suite, etc.), computer equipment, monitors, tablets, cameras - fully deductible if used primarily for business. **Internet & Phone**: You can deduct the business portion of your internet and phone bills. Since you work from home 75% of the time, that's a reasonable percentage to claim. **Professional Development**: Courses, workshops, conferences, books, and subscriptions related to graphic design are all deductible. **Marketing & Networking**: Website hosting, business cards, portfolio printing, networking event fees, client entertainment (50% deductible). The key is documentation - keep every receipt and maintain a simple spreadsheet throughout the year. I also recommend setting aside about 25-30% of your income for taxes since you're self-employed. Better to overpay quarterly than get hit with a big bill in April!

One more important thing: if you deducted any medical expenses in previous years that were later reimbursed by this settlement, you may need to report that reimbursement as income in the year you receive the settlement (called the "tax benefit rule").

Based on your breakdown, you're on the right track! The $6,500 for lost wages is definitely taxable income that you'll need to report. The medical expenses ($14,500) and pain/suffering ($8,000) portions are not taxable since they're compensating for physical injuries. For the $3,000 car repair portion, as long as it doesn't exceed what you originally paid for the car (minus any depreciation), it's typically not taxable income either - it's just making you whole for your property loss. One thing to watch out for: if you itemized deductions in previous years and deducted any of those medical expenses that are now being reimbursed by the settlement, you might need to include that reimbursed amount as income under the tax benefit rule. Also don't forget to check your state tax requirements - while federal rules are fairly clear on settlements, some states have different approaches to taxing settlement proceeds. Keep all your settlement documentation organized. The IRS likes to see clear records showing how the settlement amount was allocated between the different categories when there are questions.