What about software subscriptions? I use estimating software and a scheduling app for my contracting business. Are those deductible too?

Absolutely! Software subscriptions used for your business are definitely deductible business expenses. That includes estimating software, scheduling apps, accounting programs, design software - basically any digital tools you use primarily for your contracting work. I'd also recommend tracking the subscription costs separately in your bookkeeping since they're a different category from physical supplies or equipment. This makes tax time much smoother when you're categorizing all your deductions.

I used it last year for my freelance work. It's decent and walks you through most deductions, but I still found myself Googling a lot of specific questions about what qualifies. The biggest advantage is it helps calculate the self-employment tax automatically and carries information forward to your next year's return.

Thank you for bringing that up! I was worried about the holding period but wasn't sure what the requirements were. It's good to know I'm in the clear for long-term capital gains treatment. Question: Does the adjusted cost basis calculation change at all based on meeting the holding period requirements? Or is it still just adding back the ESPP discount amount that was already included in my W-2?

The adjusted cost basis calculation remains the same regardless of whether you met the holding period requirements. You still need to add back the discount that was included in your W-2 income. The holding period just affects how the gain is classified (long-term vs. short-term) and whether you might have additional ordinary income to report. With a qualifying disposition like yours, you only have the capital gain to worry about (proceeds minus adjusted basis). The fact that you held the shares long enough simplifies things because you'll get the lower long-term capital gains tax rate on your profits.

Does FreeTaxUSA really handle this well? I've been using H&R Block online and it's completely confusing for stock sales. I have to manually override everything. Might switch if there's something that handles ESPP sales better.

She mainly did option 2 - she acknowledged it could be useful and said she'd look into the details for my specific situation. She didn't dismiss it, which is good, but I'm still concerned that I had to bring it to her attention rather than her suggesting it as a potential strategy. Does that seem reasonable?

That's actually a good response from her. Being willing to research and verify rather than dismissing or blindly accepting shows professional diligence. While ideally she would have suggested this strategy herself, the reality is that tax professionals can't possibly know every strategy for every client situation off the top of their heads. What matters more is her willingness to explore options you bring up and whether she proactively suggests other strategies during your planning sessions. If this is the only instance where you've felt her knowledge was lacking, I wouldn't worry too much. However, if you regularly find yourself educating her on tax strategies you've researched independently, it might be worth finding a CPA who specializes more specifically in small business and S-corp taxation.

This is really good advice. Do you have any recommendations for resources where business owners can educate themselves on potential tax strategies? I feel like I don't know enough to even ask the right questions sometimes.

Thank you!! This is exactly what I needed to know. When you made the switch, did you have to wait for formal approval before filing your taxes as an S-Corp, or could you file that way based on having submitted the election form?

When I submitted my Form 2553, I did wait for the formal approval letter before filing my taxes as an S-Corp. However, if you've submitted the form and tax season is approaching, you have options. You can file an extension to give yourself more time to resolve this. This doesn't extend your payment deadline, but it gives you until October to file the actual returns. In the meantime, you can keep following up with the IRS about your election status. If you're confident you submitted everything correctly, you could also proceed with filing as an S-Corp, attaching a copy of your submitted Form 2553 to your return with an explanation that it's pending approval.

For 2024, you needed to file Form 2553 within 2 months and 15 days of the beginning of the tax year (so by March 15, 2024 for calendar year businesses). But you can still file late with a "reasonable cause" statement explaining why you missed the deadline, and the IRS may accept it. Or you can just make the election for 2025 instead.

Thanks for the info! Guess I missed the deadline for this year. I'll probably just plan to do it for 2025 rather than trying to explain a late filing. Do you know if I should file it now for next year or wait until January?

Oh that's something I hadn't considered at all! I bought the furniture back in October but didn't actually set it up and start using it until November. Does the "placed in service" date mean when I bought it or when I actually started using it? And what's this half-year convention thing?

The "placed in service" date is when the property is ready and available for its intended use - so that would be November when you set it up, not when you purchased it in October. The half-year convention is a simplification rule that assumes you placed assets in service halfway through the year, regardless of when you actually started using them. So for the first year of a 7-year property with straight-line depreciation, you'd take 1/14th of the cost (half of 1/7th). However, if you place more than 40% of your total assets for the year in service during the last 3 months, you have to use the mid-quarter convention instead, which is more complicated and bases your first-year depreciation on which quarter you placed the asset in service.

I use TurboTax Self-Employed and it handles depreciation pretty well. When you get to the business expenses section, there's a separate category for assets that need to be depreciated. Just follow the prompts and it'll ask for purchase date, cost, and business use percentage. It automatically applies the correct MACRS schedule for office furniture (7 years). Office furniture isn't "listed property" so you'd select "no" for that question.