Did you have any issues with the IRS questioning the deduction? I'm worried about raising audit flags since credit card interest isn't the typical way people finance investments.

No issues with the IRS so far. The key was having super clear documentation showing exactly which charges were for the investment and keeping those separate from personal expenses. I also made sure the investment itself was properly documented with a business plan and formal agreements. Having a dedicated card helps a lot. If you're already using a mixed-use card, at least try to stop using it for anything but the investment going forward. Makes the paper trail much cleaner.

Thanks for pointing that out! My investment is actually in a private tech startup, not muni bonds or tax-exempt securities. Does that change anything about how I should approach this?

This is a really important point about liability that people often overlook. My brother-in-law is a contractor and was sued when a cabinet he installed fell and injured someone. His own insurance had to cover it, but if he'd been an employee, the company's insurance would have handled everything.

You're absolutely right about the liability risks. I've seen contractors face devastating financial consequences when something goes wrong on a job and they discover their insurance coverage had gaps. Company insurance policies typically have much higher coverage limits than individual policies. The other consideration is workplace injuries. As a W-2 employee, workers' comp would cover medical expenses and lost wages if your husband gets injured on the job. As a 1099, he'd need his own disability insurance policy, which can be expensive for high-risk trades like carpentry.

Yes! This has been causing chaos in my industry (graphic design). All of my small clients are suddenly panicking about paperwork. Some have even told me they're only working with LLCs now because they don't want to deal with 1099s for individuals anymore.

That formula is super helpful, thank you! Does the HSA provider typically issue any special tax form for the earnings on the excess that I need to watch for next year? I want to make sure I report everything correctly.

Yes, you'll receive a 1099-SA from your HSA provider that shows the distribution, and there should be a code indicating it was an excess contribution removal. The earnings portion will need to be reported as "Other income" on your tax return for the year you take the distribution (so likely 2025 tax return if you're handling this now). Also, your HSA provider should send you a Form 5498-SA showing your total contributions for the year, but this typically doesn't reflect the removal of excess contributions in a way that's immediately clear. You'll need to keep good records of the excess removal to reconcile everything when you file.

This gets tricky. When you remove excess contributions, you're technically removing the most recent contributions first. If you've spent HSA funds on qualified medical expenses, those distributions are considered to have come from your valid contributions first, not the excess. So even if you've spent money from your HSA, you still need to remove the full excess amount (plus earnings). You'll need available funds to do this. If your current HSA balance is less than the excess amount you need to remove, you may need to add funds back temporarily just to facilitate the removal.

Does the timing of salary changes matter? Like if I start with $60k in January but business is booming by June, should I give myself a mid-year raise or wait until the following year?

Yes, you can absolutely give yourself a mid-year raise if circumstances warrant it. Many S-Corp owners adjust their salaries as the year progresses and business performance becomes clearer. Just document your reasoning thoroughly - note the increased business performance, expanded responsibilities, or whatever factors led to the adjustment. What the IRS doesn't like to see is erratic salary patterns that appear to be manipulating payroll taxes rather than reflecting actual changes in the business. For example, artificially keeping salary low all year then taking a massive "bonus" in December looks suspicious. A clean mid-year adjustment with clear business justification is perfectly acceptable.

Is that 1/3 of profit BEFORE or AFTER your salary is deducted? Because that makes a huge difference in the calculation.

Our daughter lives with me about 70% of the time, and I'm the custodial parent according to our divorce decree. My ex was supposed to claim her last year because we verbally agreed to alternate years, but apparently he never did. We don't have anything formal like Form 8332 filed. Does that mean I should definitely file the amendment then?

Yes, you should definitely file the amendment. Since you're the custodial parent with the child living with you 70% of the time, and you didn't sign Form 8332 to release the claim, you have the legal right to claim your daughter as a dependent. Without Form 8332, a non-custodial parent cannot claim the child regardless of verbal agreements. The IRS follows the documentation, not verbal agreements between parents. You're potentially leaving significant money on the table by not claiming her, especially with the expanded Child Tax Credit.

I used TurboTax to amend my return last year when I forgot to claim my son's college expenses. It was surprisingly easy - you just start an amended return and it walks you through what you want to change. For something like adding a dependent, it should recalculate everything including any credits you might be eligible for.