But wouldn't selecting "LLC" cause problems with lenders who want to see S-Corp status because it shows more formality and structure? I heard S-Corps get better loan terms than LLCs.

That's a misconception. Lenders care about your business financials, credit history, and time in business far more than your tax election. The S-Corp election is primarily a tax benefit related to self-employment taxes and doesn't actually make your business more "formal" in the eyes of lenders. If you're concerned, you can always include your S-Corp election documentation with your loan application as an additional attachment. But selecting "LLC" as your entity type is still correct, since that's your actual registered business structure.

This is really helpful! Does the same logic apply for an LLC being taxed as a C-Corp? I just made that election this year and I'm super confused about how to fill out forms now.

Thanks for these suggestions! I'm wondering about the SEP IRA option - how much could that potentially reduce my tax bill? And do you know if I can still open one for last year's taxes?

You can still open and fund a SEP IRA for 2023 until the tax filing deadline (including extensions), so that's potentially a good option to reduce your 2023 tax bill right now. For a SEP IRA, you can contribute up to 25% of your net self-employment income, with a maximum contribution of $66,000 for 2023. At your income level, this could significantly reduce your taxable income. For example, if you could contribute $5,000 to a SEP IRA, that would reduce your taxable income by $5,000, potentially saving you $750-1,200 in taxes depending on your bracket.

I did this last year and won! But be prepared - my employer was FURIOUS and I ended up having to find a new job. Worth it financially, but definitely had some fallout.

Is there a specific form or worksheet where we calculate this split between immediate deduction and amortized points? My loan officer never mentioned this and I used $35k from my refi last year for a bathroom remodel.

There isn't a specific IRS form just for this calculation. You'll need to determine what percentage of your loan was used for home improvements, then apply that percentage to your total points paid. For your situation with $35k used for the bathroom, you'd calculate what percentage that is of your total refinance amount. If your total loan was $300k, then about 11.7% of your points could be deducted immediately. You'd include the immediate portion with your other itemized deductions, and create a simple worksheet showing your calculation in case of audit. The remaining 88.3% would be spread over the loan term.

There's no minimum amount specified by the IRS for the home improvement exception. Whether it's $8k or $80k, the same rule applies - the portion used for home improvements can have points deducted immediately. Just make sure you keep good records of the renovation expenses to prove how the money was used.

Oh wow, I had no idea about the FBAR thing. Do they file that with the IRS or someone else? And how does that work if they don't have SSNs? The account will definitely go over $10,000 since they're using it for their business income.

FBARs are actually filed with FinCEN (Financial Crimes Enforcement Network), not the IRS, using FinCEN Form 114. Your parents can use their foreign tax ID (whatever Panama uses) on the form instead of a SSN. They'll need to file it electronically through the BSA E-Filing System. For non-US persons, this is purely a reporting requirement, not a tax. The US government just wants to know about foreign persons with significant US accounts as part of anti-money laundering efforts. The deadline is April 15th but there's an automatic extension to October 15th if you miss it. Penalties for non-filing can be steep though, so definitely make sure they look into this!

This is a really important point. The substantial presence test counts days over a 3-year period with a weighted formula. If they hit 183 equivalent days, they could be considered US tax residents and have to report worldwide income. I've seen this happen to several clients who were completely caught off guard.

Interesting point about the Roth. I thought there were income limits for Roth IRAs too? We're over $136k so wouldn't we be over the limit for direct Roth contributions as well? How does this backdoor thing work?

Yes, there are income limits for direct Roth IRA contributions too - for 2025, they phase out between $146,000-$156,000 for married filing jointly. The "backdoor Roth" method involves making a non-deductible contribution to a traditional IRA (which has no income limits) and then converting it to a Roth IRA. The conversion itself doesn't have income limits. The main benefit is that Roth IRA withdrawals are tax-free in retirement, whereas with a deductible traditional IRA, you'll pay taxes when you withdraw. For your non-working spouse, you have both options available since you're below the spousal IRA deduction threshold of $230k.

Also worth noting you can contribute for 2024 until April 15, 2025. So if you haven't maxed out 2024 contributions yet, you still have time to do that before starting on 2025.