I'm really confused by all this ERTC amendment stuff... My CPA told me the reduction should only be for the refundable portion, not the nonrefundable part. But now I'm reading conflicting advice here. Does anyone have an actual IRS reference that clarifies this?

I went through this exact same situation with my S-Corp last year and can confirm what others have said - you need to reduce wage expenses by the FULL ERTC amount (both refundable and nonrefundable portions), excluding any interest received. The key thing to remember is that the ERTC is essentially the government reimbursing you for wages you paid, so you can't also deduct those same wages as a business expense. It would be double-dipping. For your $87k in 2020 and $112k in 2021 refunds, make sure you separate out any interest portion before calculating the wage expense reduction. The interest is taxable income but doesn't affect the wage deduction adjustment. One heads up - this will create a significant increase in your pass-through income, which means additional personal tax liability when you amend your 1040s. With amounts that large, you might want to consider making estimated payments to avoid underpayment penalties. The amendment process can take several months, so plan accordingly for the cash flow impact.

My accountant always tells me to focus on the "ordinary and necessary" test for business expenses rather than just the timing. If this conference is ordinary and necessary for your business type, the IRS is less likely to question it regardless of when you deduct it. Just make sure you have good documentation showing how it relates to your business - things like the conference agenda, notes you took, business cards you collected, etc. This has saved me multiple times during reviews.

This is exactly the kind of timing question that trips up so many small business owners! The key thing to remember is that for most small businesses using cash accounting, you generally deduct expenses in the year you both pay for them AND receive the economic benefit. Since your conference is in September 2025 and you're not paying until then, that's clearly a 2025 deduction. Even if you had prepaid in 2024, the IRS could still argue the economic performance doesn't occur until you actually attend the conference. One thing I'd add to the great advice already given - consider keeping a simple spreadsheet of planned business expenses like this so you can do better tax planning for next year. Knowing you'll have that conference deduction in 2025 might influence other timing decisions you make with income and expenses. Also, don't forget that if you travel for the conference, those travel expenses (flights, hotels, 50% of meals) are also deductible business expenses for the same tax year as the conference itself.

Don't forget there's also the "material participation" test for businesses. The IRS looks at whether you're actively involved in the operations on a regular, continuous, and substantial basis. For a side gig like yours, you'll want to keep good records of time spent working on your business. I track hours for my consulting work using a simple app. This helps support business classification if the IRS ever questions it.

Friendly reminder that the business vs. hobby distinction isn't just about which one saves you more in taxes right now! If you genuinely have a profit motive and are running this as a business, you should file as a business even if it might cost more in taxes. Filing as a hobby when it's really a business can cause problems later if you get audited. Plus, business losses can sometimes offset other income, and you're building Social Security credits with self-employment taxes.

Based on all the helpful discussion here, it sounds like you should be able to claim the credit since you're living there as your primary residence and paying for the improvement. However, I'd strongly recommend getting this confirmed in writing before making such a large purchase. One thing I haven't seen mentioned is that you might want to consider having a written agreement with your in-laws about the improvements you're making. Since you're essentially investing in their property, it could be beneficial to document that you have permission to make these improvements and that you're responsible for the costs. This could help support your tax credit claim and also protect your investment in case your living situation changes. Also, since you mentioned you'll be there for 2-3 years, make sure you understand what happens if you move before the system pays for itself through energy savings. The tax credit helps upfront, but you want to make sure the overall financial arrangement makes sense for your timeline.

This thread has been incredibly helpful! As someone who's been researching this exact situation, I want to add one more consideration that might be relevant. Since you're living in your in-laws' house under an informal arrangement, you might want to check if there are any gift tax implications if the total value of your improvements (including the heat pump) exceeds certain thresholds. The IRS might view substantial property improvements as gifts to the property owners, especially if there's no formal lease agreement. That said, for the heat pump specifically, the consensus here seems solid - you should be able to claim the 30% credit since it's your residence and you're paying for it. Just make sure to document everything thoroughly: receipts, manufacturer certifications, proof of residence (utility bills in your name, voter registration, etc.), and ideally that written agreement with your in-laws that others mentioned. One last tip: if you're planning other energy-efficient improvements during your time there (like insulation, windows, or a smart thermostat), you might be able to claim credits for those too under the 25C credit program, which covers up to $1,200 annually for various efficiency improvements.

Has anyone actually claimed this credit as a non-owner and gone through an audit successfully? I'm in a similar situation with my parents' property and getting conflicting info from different tax preparers.

I went through this exact situation two years ago when I installed a heat pump at my grandmother's house where I was living. The key thing that helped me was getting everything documented upfront - I made sure all the invoices were in my name, kept utility bills showing I lived there, and got a letter from my grandmother confirming I was responsible for the improvements. One thing I'd add to the great advice already given - consider having a written agreement with your in-laws about the improvements you're making. Even something informal can help establish that you're genuinely responsible for these costs as part of your living arrangement, not just doing them a favor. This could be helpful if the IRS ever asks questions about why a non-owner is claiming the credit. The 30% credit is substantial, so it's definitely worth pursuing if you meet the requirements. Just make sure you understand which components of your HVAC system qualify - the heat pump itself definitely does, but things like ductwork modifications might not.