Thanks for the reminder about self-employment taxes! That's definitely good to know for when (hopefully) my business starts turning a profit. Is there any threshold I need to hit before I have to start paying those taxes? Like a minimum profit amount?

Yes, there's a small threshold - you only have to pay self-employment tax if your net earnings from self-employment are $400 or more during the year. So once your business starts making more than $400 in profit, that's when you'll need to start paying these taxes. It's also worth noting that once you start making profit, you might need to make quarterly estimated tax payments to avoid underpayment penalties. A lot of side business owners don't realize this until it's too late and end up owing penalties their first profitable year.

But be careful with home office deduction! The space must be used EXCLUSIVELY for business. If you're using your dining table or a corner of your bedroom that you also use for personal stuff, it doesn't qualify. I got audited over this exact issue with my graphic design side hustle.

Is there some way to know where these thresholds are before you estimate your income? I'm about to sign up for next year and don't want to get surprised again.

Yes, the main thresholds for 2025 coverage are at 150%, 200%, 250%, and 400% of the Federal Poverty Level. The exact dollar amounts depend on your household size and state, but you can find charts online. If you're close to one of these thresholds, be very careful with your income estimate. Sometimes it's actually beneficial to manage your income to stay just below a threshold (through retirement contributions or HSA contributions) if you're very close. The Marketplace website itself won't warn you about these cliffs, but they make a huge difference in what you'll ultimately pay.

This is good advice. I've made errors copying from the 1095-A before. Those forms have so many numbers in columns that look alike.

11 How do you determine what counts as a "reasonable salary"? I've heard the IRS watches this closely. Is there a specific percentage of income that's considered safe?

5 There's no fixed percentage that's automatically considered "reasonable" - it depends on your industry, location, expertise, and what similar positions would pay in your area. Research salary data for your role and industry in your geographic area as documentation. Generally, your salary should be comparable to what you'd pay someone else to do your job. Too low a salary relative to distributions is a red flag for IRS scrutiny. Some tax professionals suggest roughly 50-60% of profits as salary can be appropriate in many cases, but again, it's situation-specific. Document your salary determination process and keep that documentation with your tax records.

1 Is there an income limit for the QBI deduction? I've heard it phases out at higher income levels but couldn't find a clear answer online.

Thanks for bringing this up! So I need to calculate not just her personal expenses, but specifically the home-related costs? I pay about $1900/month in rent, and she probably spends around $600-700 on utilities and groceries. Does that sound like I'd meet the maintaining a home test?

Based on those numbers, you're likely meeting the maintaining a home test. Your annual rent contribution is about $22,800 ($1900 × 12), while her utilities and groceries total around $7,800 ($650 × 12). That puts the total home maintenance at approximately $30,600, with you covering about 75% of those costs. This looks like you're well above the 50% threshold for the maintaining a home test. Just make sure you have documentation for your rent payments throughout the year. Also, keep in mind this is separate from determining if she qualifies as your dependent, which involves looking at her total support costs and income limits.

For HOH status, the person must either be your qualifying child or qualifying relative (dependent). The only exception is if you're claiming HOH based on a qualifying dependent parent - they don't actually have to live with you. For all other qualifying relatives, they must live with you for more than half the year AND be your dependent.

Is there an income limit for VITA to help with Schedule C? I thought they only did simple returns and turned away any business income?

VITA generally helps taxpayers who make $60,000 or less, and while some locations might turn away complex business returns, many VITA sites have volunteers certified to handle simple Schedule C forms like yours would be. It does vary by location though - when you call to make an appointment, just specifically ask if they can handle a simple Schedule C with minimal income and expenses. Some sites have advanced-certified volunteers who definitely can help with this.

Yes! All the major tax software handles federal and state together. California isn't as bad as people make it sound for simple situations. I'm in CA too and did my Schedule C last year with minimal income through FreeTaxUSA. The state part was actually easier than the federal section.