Wait, really? I had no idea about this QBI deduction! Does it have income limits or phase-outs I should know about? And do I need to form an LLC or something to qualify for it?

Yes, there are income thresholds where phase-outs begin. For 2025, the phase-out begins at $191,950 for single filers and $383,900 for married filing jointly. Since your income is $105k, you should be well below these limits and eligible for the full 20% deduction. You don't need an LLC to claim this deduction - you can claim it as a sole proprietor reporting income on Schedule C. The QBI deduction is calculated on your net profit after business expenses, not on your gross 1099 income. This is another reason to make sure you're tracking all legitimate business expenses properly.

S-Corps can definitely be a tax-saving strategy for higher-income contractors, but they come with additional costs and complexity. With an S-Corp, you'd pay yourself a "reasonable salary" which is subject to FICA taxes (Social Security and Medicare), but you can take the rest of your business profits as distributions that aren't subject to self-employment tax. This can save you about 15.3% on the distribution portion. However, you'll have additional expenses: incorporation fees, annual state fees, separate tax return preparation, payroll processing, etc. Generally, the breakeven point where an S-Corp makes sense is around $80-100k of net profit, so at $105k you might benefit, but you should run the numbers carefully.

5 Do you think it matters if we stay at nicer hotels vs budget places? Sometimes the cheaper hotels are in sketchy areas and I don't want my guys to feel unsafe, but my CPA said luxury accommodations might raise red flags.

10 The IRS doesn't have a specific guideline on hotel quality, but they do look for "lavish or extravagant" expenses. Mid-range business hotels (Hampton Inn, Holiday Inn Express, etc.) are never an issue. You can absolutely prioritize safety without raising red flags. What would potentially cause problems is if you're putting your crew in 5-star luxury resorts when there are perfectly good business-class hotels available in the area. It's about what's reasonable and customary for your industry. If you're operating a mid-size construction company, stay at hotels that reflect that business level.

16 I tried TurboTax Self-Employed for my electrical contracting business and wasn't impressed. It asked basic questions but didn't give industry-specific guidance. When I entered business meals and travel, it just calculated the deduction but didn't help with documentation requirements or explain the 50% limitation on meals.

I hadn't thought about Roth conversions at all. How would you determine how much to convert each year? Is there some kind of sweet spot?

You want to convert just enough each year to "fill up" her lower tax brackets without pushing her into a bracket where the tax cost becomes too high. It's often best to convert amounts that keep her in the 10% or 12% federal brackets. For the Social Security taxation specifically, you'd ideally convert amounts that keep her combined income (AGI + nontaxable interest + 1/2 of SS benefits) below $25,000 if possible, or at least below $34,000 to avoid the 85% taxation threshold. Many people find converting $5,000-8,000 per year strikes a good balance, but it's very specific to her overall financial situation.

I've had good luck with H&R Block Premium. It has a feature that lets you run scenarios for the following year and shows how different income levels affect your Social Security taxation. Not perfect but better than TurboTax for this specific issue in my experience.

Do you know if this varies by state? I'm in Texas which doesn't have state income tax, but I'm curious if there's a comprehensive list somewhere of how different states handle this. I might move to Colorado next year.

Yes, it definitely varies by state. Texas has no state income tax as you mentioned, so you don't have to worry about it currently. For Colorado, they generally follow the federal treatment, but they do have some specific forms for retirement income. There's no single comprehensive list that I'm aware of, but most state tax department websites have sections on retirement account contributions. The safest approach when you move is to check Colorado's Department of Revenue website or call them directly. States like New York, California, and Massachusetts often have more distinctive rules that differ from federal treatment.

Good point! Also worth mentioning that employer matching contributions don't count toward the employee deferral limit of $20,500 (for 2022). Some people confuse the employee limit with the overall 415(c) limit which includes all contributions.

I don't think we ever made any special elections - we were always just a simple pass-through partnership. But that's a good thing to double-check. Is there a way to confirm what elections might be in effect for an EIN?

You can verify any tax elections by calling the IRS Business & Specialty Tax Line at 800-829-4933. When you get through, request your "entity control information" and they can tell you exactly how your LLC is classified and any elections that are in effect. For most simple LLCs that never filed anything special, you're probably fine. But if you or your accountant ever filed forms like 2553 (S-Corp election) or 8832 (entity classification election), you'll want to address those specifically. In my case, I had elected S-Corp status years earlier and forgot all about it!

Good point! Also check if you had any business credit cards, vendor accounts, or state tax accounts (like sales tax permits) that need to be closed separately. Those don't automatically close when you dissolve the LLC or close the EIN.