That's interesting because it contradicts what others are saying. So if I understand correctly, either I should: 1) Count the $250 gift card as taxable income AND deduct the full $290 expense, or 2) Not count the gift card as income AND only deduct the $40 I paid. Is that right? Which approach would be better for my situation?

You've got it exactly right - those are the two consistent approaches. If you're asking which is better, it typically depends on your specific tax situation. Option 1 (count card as income + full deduction) usually works better for businesses with significant expenses and deductions already, as the additional deduction value ($250) would likely exceed the tax impact of the additional income. This is especially true if you have business losses or are in a low tax bracket. Option 2 (no income + partial deduction) is generally simpler and often preferred for smaller side businesses or if you're in a higher tax bracket where additional income could push you into a higher rate. Since promotional gift cards are generally not considered taxable income, this approach is administratively easier and avoids potentially triggering an unnecessary audit flag.

Credit card points are generally treated differently than promotional gift cards. The IRS typically views credit card rewards as rebates on purchases you've already made (which is why they're not taxable income). So if you redeem points for a business purchase, you can only deduct your actual out-of-pocket cost after the points are applied. But it gets more complicated if you're using a personal credit card for business purchases and then using the reward points for business items. You might need to allocate the value of the points based on what percentage of your card spending was for business vs. personal.

That's a really good point about state requirements. I'm in Colorado - does anyone know if there are specific requirements here I should watch out for? And what's the difference between SEP IRA vs Solo 401k in terms of setup complexity in TurboTax?

Colorado has an annual report requirement called a "Periodic Report" that costs $10 to file online. It's due in the anniversary month of your LLC's formation. It's not a tax form, but a filing with the Secretary of State's office to keep your LLC in good standing. TurboTax won't remind you about this. For retirement accounts, a SEP IRA is simpler to set up in TurboTax - just a few questions and you're done. A Solo 401k gives you potentially higher contribution limits, especially if you want to make both employer and employee contributions, but requires more paperwork outside of TurboTax and you'll need to file Form 5500-EZ once your balance exceeds $250,000. For your income level, a SEP IRA is probably simpler to start with.

I had a similar issue but fixed it by making sure I was completely exiting the program properly (not just closing the window). Also, make sure your Mac isn't going into any kind of deep sleep mode between sessions. I started using the save feature obsessively after losing data once - hit save after every major section.

How much extra paperwork did that create for you? Like did you have to file separate tax forms for your wife's "business" or was it all still included in your joint return?

It didn't create much extra paperwork at all. Even though my wife had her own EIN for the household employee (her father), we still filed everything on our joint return. We just used Schedule H to report the household employment taxes, and made sure to note her EIN on the form rather than mine. The Schedule H gets attached to your joint 1040 regardless of which spouse is technically the employer. The only real difference is whose name and EIN appear on the W-2 you issue to the employee. So there was no separate business filing or anything complicated - just making sure the right EIN was used on the forms.

Great point! Do you remember where you got your workers comp policy from? I'm trying to figure out where to get one for our household employee.

Is the Credit for Other Dependents the same as the Foreign Dependent Credit mentioned earlier? Or are these two different credits I could potentially claim? And would my children still need to meet the residency test to qualify for this credit?

The Credit for Other Dependents is the official name of what some people call the Foreign Dependent Credit. They're the same thing - a $500 credit for dependents who don't qualify for the full Child Tax Credit. This is exactly what was created for situations like yours. No, your children don't need to meet the US residency test for this credit, which is why it works for dependents living abroad. They still need to qualify as your dependents under tax law, meaning you provide more than half their support. You'll claim this on your Form 1040 in the same section where the Child Tax Credit would be, but you'll indicate they qualify for this $500 credit instead.

That's incorrect advice and could get you in trouble. The IRS residency test requires the child to have the same principal residence as the taxpayer for more than half the year (183+ days). A 31-day visit doesn't meet this requirement.

This is interesting - does this apply even if the property is unoccupied during renovation? I have a couple properties that sit empty for 2-3 months during renovations before I stage them and list them. Can I deduct those carrying costs as ordinary expenses too?

Yes, it absolutely applies during renovation periods too! The key distinction is whether the property is "held for sale" or "held for production of income" during that time. During active renovation periods for a flip property, the property is considered to be in preparation for sale, so those carrying costs (mortgage interest, property taxes, utilities, insurance, etc.) can generally be deducted as ordinary expenses rather than being capitalized into the basis. This is especially true if you're considered a "dealer" for tax purposes rather than just an investor.

That's a really smart approach! Do you have any issues with the IRS questioning this distinction? I'm worried about having my staging expenses disallowed if audited.

I've been doing this for 6 years now and haven't had any issues with the IRS. The key is documentation and consistency. I keep a clear project timeline for each property that shows when renovation was completed and when staging began. I also make sure my staging invoices are separate from any contractor or renovation invoices, with clear dates. It's also important to have a consistent business practice. I don't try to treat similar expenses differently on different properties. I've developed a written business policy that explains my approach to staging as a marketing expense, which would help demonstrate my intent if ever questioned during an audit.