Thanks for mentioning this! What exactly are the Excess Business Loss limits for 2025? I've been so focused on the passive vs non-passive issue that I totally overlooked this potential limitation.

For 2025, the Excess Business Loss limitation is $300,000 for single filers and $600,000 for joint filers. This means if your total business losses exceed your business income by more than these thresholds, the excess gets carried forward to future years. For most people with a single vacation rental property, this limit isn't an issue. But if you have multiple properties or other business losses, it could come into play. The At-Risk Rules are potentially more relevant in your case - they limit your deductible losses to the amount you have "at risk" in the activity, which typically includes your cash investment, the portion of loans you're personally liable for, and certain qualified non-recourse financing.

Totally agree! I feel like half of tax law is hidden in obscure regulations that normal people would never find. It seems like they make it intentionally complicated.

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.

Thank you for mentioning QBI! I didn't even know about that deduction. Do both of my businesses qualify for that? And would I apply it to each Schedule C separately?

Yes, both of your businesses should qualify for the QBI deduction as they're both reported on Schedule C. The deduction is actually calculated on your total qualified business income across all qualifying businesses, not on each Schedule C separately. The basic calculation is 20% of your net business income (after expenses), but there are income thresholds where it starts to phase out or get more complicated (over $170,700 for single filers in 2024, which doesn't sound like it applies to you). This deduction alone could significantly reduce what you owe, possibly explaining the high amount you saw on the first website you tried.

Which tax software did you use? I tried [popular tax software] and it didn't explain anything about allocating home office expenses between multiple businesses.

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!

Dude, Texas has none of that garbage. No state income tax and LLC filing is like $300 one time. So many California business owners moving here for that reason.