One thing to consider - if you're in a high-tax state, the state tax savings could be substantial too! Everyone always focuses on federal, but don't forget to factor in state tax savings when deciding if a dedicated home office is worth it. In my case (California), the state tax savings added another 30% on top of the federal savings from my home office deduction.

Just wanted to add something that might be helpful - make sure you understand the record-keeping requirements if you do set up that dedicated space. The IRS expects you to maintain detailed records showing the exclusive business use. I keep a simple log of my business activities in the space, take dated photos of the setup, and maintain receipts for any office-related purchases. It might seem like overkill, but if you're ever audited, having thorough documentation makes the process much smoother. Also, consider the timing - if you're setting up the space mid-year, you can only deduct expenses for the portion of the year it was actually used for business. So if you convert the space in July, you'd only get 6 months of deductions for 2025. With your numbers ($920 federal + $190 state), even a partial year could be worthwhile, and you'd get the full benefit starting in 2026.

Has anyone here actually done the math on SEP IRA vs 401k for an S-corp owner? I'm in a similar situation to the original poster and trying to figure out if the switch is worth it.

The transition from SEP IRA to 401k when adding employees is actually pretty common for growing S-corps, so you're definitely on the right track. One thing I'd add to the great advice already given - make sure you coordinate the timing carefully if you're planning to make a final SEP contribution for 2024. Since you can make SEP contributions up until your business tax filing deadline (including extensions), you could potentially make your final 2024 SEP contribution as late as September 2025 if you file an extension. Just make sure this doesn't overlap with when you start your 401k contributions to avoid any confusion. Also, consider whether you want to offer any matching in your new 401k plan. It's a great way to attract and retain employees, and as an S-corp owner, you'll benefit from the match too. The administrative costs are usually worth it once you have multiple employees, especially compared to having to contribute equally for everyone under a SEP.

Has anyone used the qualified business income deduction (Section 199A) to reduce their AGI? I have a small side business that made about $12k last year but I'm confused if this counts as an AGI reducer or if it comes after AGI is calculated.

Great question Connor! Since you mentioned having freelance income, don't overlook the self-employment tax deduction - you can deduct 50% of the self-employment tax you pay, which directly reduces your AGI. This often gets missed but can be significant if your side work generated substantial income. Also, if you're paying for your own health insurance (not through an employer plan), those premiums can be fully deductible as an above-the-line deduction if you're self-employed. Even if it's just for part of your income. One more thing - if you haven't already, consider opening a traditional IRA for 2023 contributions (you have until April 15, 2024). Even if you have a 401k at work, you might still be able to deduct IRA contributions depending on your income level. The deduction phases out at higher incomes, but with your mix of W-2 and freelance income, you might still qualify for at least a partial deduction. The key is maximizing those above-the-line deductions since they directly reduce AGI, which then affects eligibility for other tax benefits and credits. Every dollar you can move above-the-line is more valuable than regular itemized deductions.

Just a thought - have u looked into medical credit cards like CareCredit? They sometimes offer no-interest financing for dental work if u pay it off during the promotional period. Doesn't help with taxes but might help with cash flow. I used it for my wisdom teeth removal last year.

Sorry you're dealing with this expensive dental bill! I went through something similar a few years ago. One thing that might help for future reference - some dentists offer significant discounts if you pay cash upfront rather than going through insurance. I saved about 30% on my crown by doing this, though I know that's not helpful for your current situation. For your tax question, everyone's right that the medical deduction likely won't help much at your income level. But here's something else to consider - if you're freelancing or have any 1099 income alongside your regular job, you might qualify for the self-employed health insurance deduction, which is above-the-line and doesn't require itemizing. It's a long shot but worth checking if any of your income comes from self-employment. Also, keep all your receipts from this year's medical/dental expenses. Even if they don't help this year, if you have more medical costs next year, having two years' worth might push you over the threshold where itemizing makes sense.

Wouldn't it be easier to just not give your SSN and instead just call it a reimbursement? If you give them your w9 your gonna have to deal with the 1099 and the whole back and forth with the IRS. Seems like more trouble than its worth for $600.

I'm dealing with a similar situation right now with my HOA. They're requiring a W-9 for reimbursing special assessment overages, and I was confused too. After reading through all these responses, it sounds like the consensus is to provide the W-9 but include clear documentation that it's a reimbursement. One thing I'd add - keep copies of everything. Your original receipt for the $750 mold test, all emails with the builder, and especially any response you get when you explain this is a reimbursement. If they do mistakenly send a 1099 later, you'll have a complete paper trail to support your position that this wasn't taxable income. Also, given all the construction issues you mentioned with multiple units affected, this reimbursement might be part of a larger settlement pattern. Document everything in case it becomes relevant for the HOA's legal action against the builder.