Yes, S-Corps are eligible for the 20% Qualified Business Income deduction. The same income thresholds apply ($170,050 for single filers and $340,100 for joint filers in 2025). Above those thresholds, limitations based on W-2 wages and qualified property start to phase in. Actually, this is where S-Corps can have an advantage over sole props for high earners. Since you're paying yourself a W-2 salary, that can help you qualify for larger QBI deductions if you're over the income threshold. It's a bit complicated but basically your W-2 wages to yourself can help satisfy the wage limitation tests.

11 Wait so does disability payments count as earned income for Roth IRA purposes? I've been on short-term disability for a few months but still contributing to my Roth.

22 No, most disability payments don't count as earned income for Roth IRA purposes. Short-term disability payments from your employer or an insurance company are generally considered taxable income, but they're not considered earned income for IRA contribution eligibility. The only exception would be if you're receiving disability payments from Social Security and you've previously opted to have those benefits taxed as wages. But that's pretty uncommon and requires specific prior arrangements with the SSA.

1 Thank you! I haven't filed yet for 2024, so I'm trying to fix this before I submit anything. Do I still need to file Form 5329 if I withdraw the excess before filing?

That's a really important point I hadn't considered! So if I did electrical work throughout the house but my office is only 15% of the total square footage, I would only be able to deduct 15% of that electrical work cost? And then the safe harbor threshold would apply to just that 15% portion?

Yes, exactly right. If the electrical work benefited the entire house and your office is 15% of the total square footage, you would only be able to deduct 15% of the total electrical cost. The safe harbor threshold would then apply to that 15% portion, not the entire bill. For example, if your total electrical work was $8,000, your business portion would be $1,200 (15% of $8,000). Since that $1,200 is well under the $10,000 safe harbor threshold, you could potentially expense that amount immediately instead of depreciating it, assuming you make the proper election on your tax return.

Keep EVERYTHING. All invoices, contracts, before/after photos, and a written timeline of when you decided to do each project. I got audited in 2023 for 2022 taxes and the IRS was very interested in the timing of my home improvements to determine if they should have been considered one project or separate ones.

That's so helpful to know about! Does this penalty abatement apply even if I've been claiming exempt incorrectly on my W-4? And would I need to specifically request this through a phone call or is it something I'd note when filing the back returns?

The First Time Penalty Abatement can still apply even if you claimed exempt incorrectly on your W-4. The IRS looks at whether you've had penalties in the prior 3 tax years, not how you filled out your withholding forms. You typically request it after you file all your returns and receive a bill from the IRS that includes penalties. You can request it by phone, mail, or sometimes through your online account. The easiest method is usually to call the IRS after you receive a bill and specifically ask for "First Time Penalty Abatement" - just be prepared to explain that you've had a clean compliance history before this.

Thank you! I had no idea about potentially qualifying for Head of Household status - I thought since I'm not married I'd just remain "Single" for filing status. Are there specific requirements for Head of Household that I should know about?

To qualify for Head of Household, you need to be unmarried at the end of the year, pay more than half the cost of keeping up a home for the year, and have a qualifying person (like your child) living with you for more than half the year. The benefit is substantial - the tax brackets are more favorable than single status, and you'll get a larger standard deduction ($20,800 for 2023 vs $13,850 for single filers). When you update your W-4, check the filing status box for Head of Household to have the correct amount withheld going forward.

Thanks for the suggestion! My health insurance premium did actually increase slightly during this period, but the pretax deduction amount seems correct. I'll definitely double-check my state withholding though - I hadn't even thought to look at that separately! I'm in Minnesota, and now that you mention it, the state withholding does look a bit different on the new paystubs compared to federal. I'll compare the percentages to make sure everything adds up.

This is good advice. I work in HR and I can tell you we WANT to know about these issues. Sometimes during system migrations, default settings get applied instead of employee-specific ones. We can't fix what we don't know about!