This has been such an informative thread! I'm in a similar situation with my freelance graphic design LLC and was making the same mistake of thinking I could somehow bypass taxation by contributing directly from my business account. Just to summarize what I've learned here for anyone else reading: You MUST pay yourself from the LLC first, pay taxes on that income, and then use the after-tax dollars for Roth contributions. There's no way around this - the IRS requires Roth contributions to come from properly reported earned income. The Solo 401(k) with Roth option sounds like the best path forward for those of us with LLCs making decent income. Being able to contribute up to $23,500 in Roth money (plus potentially more in traditional contributions) versus just $7,000 with a regular Roth IRA is a huge difference for retirement planning. One question I still have - if I set up a Solo 401(k), can I still contribute to my existing Roth IRA in the same year, or do I have to choose one or the other? I've had my Roth IRA for about 8 years and would hate to lose that 5-year clock if possible.

This thread has been incredibly helpful! I'm a tax attorney who works with a lot of small business owners, and I wanted to add a couple of important points that might save people some headaches: First, regarding the S-Corp election discussion - there's a "reasonable salary" requirement that the IRS takes seriously. If you elect S-Corp status, you MUST pay yourself a reasonable W-2 salary for the work you perform, even if it means higher payroll taxes. You can't just pay yourself $20k salary and take $70k in distributions to avoid payroll taxes. The IRS has been cracking down on this, and penalties can be severe. Second, for those considering Solo 401(k)s, remember that if you ever hire employees (even part-time), you'll generally need to include them in the plan, which can get expensive and complicated. A SEP-IRA might be a better choice if you think you'll expand your team. Finally, I'd strongly recommend working with a qualified tax professional before making major changes to your business structure or retirement strategy. The tax code is complex, and what works for one person's situation might create problems for another. The services mentioned in this thread (like taxr.ai) might be helpful for analysis, but they shouldn't replace professional advice for significant decisions. Great discussion overall - it's refreshing to see people taking retirement planning seriously!

3 has anyone dealt with the 1098-T form in this situation? my daughter's school sent her the form with HER ssn on it since she's the student, but if i'm claiming her and the education credit, do i need to somehow get that form reissued to me? how does this work with electronic filing?

This is such a helpful thread! I'm in a similar situation with my college sophomore who paid about $12,000 in tuition from her summer job earnings. One thing I learned from my tax preparer last year is to keep really detailed records of what you're paying for your kids' support - not just the big things like housing and health insurance, but also groceries, phone bills, car insurance, etc. The IRS "more than half support" test includes ALL living expenses for the year. I created a simple spreadsheet tracking what I pay vs what she pays, and it was eye-opening. Even though she paid her own tuition, I was still covering about 65% of her total support costs. This documentation gave me confidence to claim her as a dependent and take the American Opportunity Credit on my return. The key is looking at TOTAL support for the year, not just who paid the biggest single expense. Tuition might be the largest line item, but when you add up housing, food, insurance, transportation, etc., parents often still provide the majority of support even for working college students.

Just to share my experience - I had a similar situation last year with small amounts from different gig apps. I reported everything and it was totally fine. Used the Schedule C and listed each company separately. It's not worth risking an audit or penalties just to save a little bit on taxes!

Just wanted to add my perspective as someone who went through this exact situation last year! I had small amounts from multiple gig apps too - around $800 total spread across three different platforms. I initially thought I could skip reporting the really small amounts (like a $60 payment from one app), but after doing some research and talking to a tax preparer, I learned that ALL income needs to be reported regardless of amount. The $400 threshold people mention only applies to whether you owe self-employment tax, not whether you need to report the income at all. The good news is that reporting multiple small gig incomes isn't as complicated as it sounds. You can combine similar gig work (like all your delivery driving) on one line of Schedule C, or list them separately if you prefer to keep better records. Just make sure to keep track of your business expenses - even small things like phone chargers, car air fresheners, or parking fees can add up to meaningful deductions! One tip: start keeping better records now for next year. I use a simple spreadsheet to track income from each app and take photos of any business-related receipts. Makes tax time so much easier!

Quick tip: make sure you're correctly classifying people as contractors vs employees. This is my biggest nightmare as a business owner. If you're telling them WHEN, WHERE and HOW to do the work, the IRS might consider them employees, not contractors. The difference matters ALOT because for employees you need to withhold taxes, pay unemployment insurance, etc. For contractors you just send a 1099. Getting this wrong can result in huge penalties and back taxes!

Great advice from everyone here! I'm actually dealing with a similar situation right now where I have about 6 subcontractors for a large project. One thing I learned the hard way is to get those W-9 forms BEFORE you make any payments, not after. I made the mistake of paying two contractors first and then asking for their W-9s later - one of them completely ghosted me and the other took weeks to respond. Now I'm scrambling to get the paperwork sorted before year-end. Also, keep detailed records of exactly what services each contractor provided and when. The IRS can ask for this documentation if there are any questions about your 1099 filings. I use a simple project tracking spreadsheet that includes dates, amounts, and description of work performed for each contractor. Makes tax time so much easier!

Have you looked into cost segregation for your rental property? It's a strategy where you identify parts of the building that can be depreciated over shorter periods (5, 7, or 15 years) instead of the standard 27.5 years for residential rental property. Things like appliances, some fixtures, and even certain components of the HVAC might qualify. This won't get around the passive activity limits, but it can front-load your depreciation deductions, which might be useful when you eventually can use them (either when income decreases or when you sell the property).

This is such a frustrating situation, but you're definitely not alone in dealing with these passive activity loss limitations. I went through something similar last year when I had major repairs on my duplex. One thing that helped me was really digging into the repair vs. improvement classification that others have mentioned. For your situation, the new heat pump is definitely a capital improvement, but depending on how extensive the drywall and carpet replacement was, some of it might qualify as repairs if you're truly restoring to the previous condition rather than upgrading. Also, don't forget that even though you can't use these losses now, they don't disappear - they carry forward indefinitely. When your income drops below the thresholds in future years, or when you eventually sell the property, you can use all those suspended losses. I know it doesn't help your current tax situation, but at least the deductions aren't permanently lost. Have you considered whether you might qualify for the $25,000 active participation allowance? It phases out completely at $150k, but if you're right at that threshold, even a small reduction in AGI through retirement contributions or other deductions might get you back into the range where you can use some of these losses.