What counts as "improvements" vs regular maintenance? Like if I put in a new transmission, is that an improvement or just maintenance? What about new tires or a sound system?

Great question! Improvements are additions or changes that add value to the vehicle beyond its original state, while maintenance just keeps the vehicle in working order. A new transmission would generally be considered maintenance since it's replacing an essential component that wore out. Same with new tires - that's normal maintenance. However, a new sound system, upgraded engine parts that enhance performance, custom paint jobs, or aftermarket additions like a high-end security system would typically count as improvements that increase your basis in the vehicle.

Yep! Minnesota resident here and our state has different rules than federal. I had to pay state tax on my car sale profit even though it was small enough to not trigger federal taxes. Check your state tax guidelines!

Exactly! Each state has its own approach. Some states follow the federal capital gains rules, others have separate vehicle sales tax provisions, and a few might not tax it at all. Always worth checking your specific state's department of revenue website before making assumptions based only on federal advice.

Thanks for the suggestion! Any specific apps you'd recommend? I'm definitely tired of trying to remember to write everything down, especially when I'm rushing between deliveries.

I've been using MileIQ for about 2 years and it's been really reliable. Stride is another popular one that's completely free and also helps track other business expenses. Everlance is good too - it has a free tier that lets you track up to 30 trips per month. The key is finding one that runs in the background without killing your battery. Most will let you export your mileage log as a PDF or spreadsheet at tax time, which looks way more professional than a handwritten notebook if you ever get audited.

This!!! I learned this the hard way my first year delivering. Didn't make quarterly payments and got hit with a penalty. The mileage deduction saved me though - turned a $3200 tax bill into about $850.

Wait, I think I might be confused now. My boss gives me cash at the end of each shift plus I keep the tips. He's never mentioned anything about a 1099 or being a contractor. Does that mean I'm an employee? How do I figure this out?

What about retirement contributions? Do those reduce your qualified business income? I contribute to a SEP IRA and I'm wondering if that affects my QBI calculation.

Retirement contributions like SEP IRA, Solo 401(k), or SIMPLE IRA contributions do not directly reduce your QBI. These deductions are taken "above the line" on your personal tax return, but QBI is calculated at the business level before these personal deductions. However, retirement contributions do lower your overall taxable income, which can be beneficial if you're near the QBI phase-out thresholds. By reducing your taxable income through retirement contributions, you might avoid or reduce the phase-out limitations on your QBI deduction, potentially making more of your business income eligible for the full 20% deduction.

Generally, you'd want to keep them separate since the SSTB limitations would only apply to your consulting business. If you aggregated them, your rental income might get caught in the SSTB limitations. The regulations allow aggregation in certain cases but don't require it.

Thanks for the info! That makes me feel better. Do you know if there's any way to tell which "batch" my return might be in? The IRS site just says "approved" but doesn't give an estimate.

Unfortunately there's no way to see which specific batch your return is in. However, once your return status changes from "Return Received" to "Return Approved," that usually means your refund will be issued within 1-3 business days. After the IRS approves your refund, it typically takes 1-5 business days for your bank to make the funds available to you, depending on your bank's policies. If you check the Where's My Refund tool and it shows "Refund Sent," that means the money has been sent to your bank.

In my experience, filing in February is actually slower than mid-March. The IRS gets swamped with early filers who have all their documents ready in February. I've filed in mid-March the last two years and got my refund within 10 days both times. April is definitely the worst though - everyone rushing to meet the deadline creates huge backlogs.

17 Quick question - for the home office deduction, does it matter if the space is also sometimes used for other things? Like, I have a desk where I package all my items, but sometimes my kids do homework there too.

22 For the home office deduction, the space needs to be used "regularly and exclusively" for business purposes to qualify. If your kids are doing homework at the same desk, unfortunately that area wouldn't qualify for the deduction since it's not exclusively business use. However, you might be able to claim a portion of your utilities, internet, and phone as business expenses based on the percentage used for business activities without taking the formal home office deduction. Just make sure you can reasonably justify the business percentage you're claiming if ever questioned.

5 Technically, the IRS requires you to report ALL income, regardless of the amount. There's no minimum threshold for self-employment income. If you earned $500 from your side business, you should report it. That said, self-employment tax (Social Security and Medicare) only kicks in when your net earnings are $400 or more. But income tax could still apply to amounts less than that, depending on your overall tax situation.