This is really interesting! Do you know if he does these showcase projects in his own home or just for select customers? And does he still write off the full cost or just a portion?

He typically does these for customers, not in his own home. The key is that there's a clear business purpose that's documented - he has customers sign a marketing release allowing him to photograph, film and show the project to potential clients. He even hosts small open houses where prospective clients can see the finished work. His accountant categorizes these as marketing expenses, but only the portion that's discounted. So if a $10,000 job is done for $6,000, he can write off $4,000 as a marketing expense. He's very careful to document everything and has a written business policy about these showcase projects. I still think your own home would be much trickier to justify, but talking to a tax pro about a formal "demonstration project" policy might be worth exploring.

The mileage tracking is so crucial. I neglected this my first year and probably lost thousands in deductions. Do you know what the rate per mile is for 2025? And does MileIQ work automatically or do you have to remember to turn it on?

That's actually really good advice and something I've been considering. Did you have trouble separating your finances from the joint account holder? I'm worried that if I pull my money out suddenly it might look suspicious for tax purposes.

When I separated my finances from my dad's joint account, I opened a new account first, then gradually moved over my direct deposits and auto-payments over a period of about a month. That way there wasn't a sudden large withdrawal that could raise flags. I also kept really clear records of which money was mine versus his in the joint account, and made sure I only took my portion. For your situation, since the deposit is clearly your mom's settlement, you should have no problem leaving that untouched while taking your pre-existing balance.

This is the right answer! Keep the money separate from the beginning. My parents did this with some inheritance money and it made everything so much cleaner for taxes. Just make sure both names are on the new account.

That's actually not a bad idea. Did you have to do anything special on your taxes when reporting that $1,800? Just list it as business income on the Schedule C?

Yes, I just reported it as regular business income on my Schedule C for that final year. Nothing special required - just normal income reporting. My accountant did recommend I keep good documentation of the bulk sale with photos of the inventory and the sale listing/agreement, just in case there were any questions later about the business winding down. But the actual tax reporting was straightforward.

This is what I did too! Local theater group was thrilled to get my leftover fabric inventory. No tax benefit but serious karma points lol.

I like this idea a lot. Even if there's no tax benefit, at least the items would go to good use. Do you know if schools typically provide any kind of receipt for these donations?

Thanks for pointing this out. So in my case, since I received the bonus in April this year and I'm repaying it next month (still in 2024), does that mean I should be able to recover all taxes including FICA? Also, what exactly should I say to HR to convince them to just take the net amount? They keep insisting on the full pre-tax amount.

Yes, if both the payment and repayment are happening in 2024, you're in the best possible situation. Your employer should be able to adjust everything (including FICA taxes) on your W-2, and it should be like you never received the bonus in the first place. For convincing HR, try this approach: "I understand the repayment requirement, but I'd like to discuss repaying the net amount I actually received rather than the gross amount. Since both the payment and repayment are occurring in the same tax year, accepting the net amount would be simpler for both parties and is consistent with IRS regulations regarding wage repayments. This approach would prevent me from having to pay back money I never actually received, while still satisfying the terms of the bonus agreement." If they still insist on the gross amount, ask them to provide written documentation of how the tax adjustment will be handled, since they'll need to correct your W-2 or provide documentation for you to claim the taxes paid when you file your return.

Did anyone have luck getting their company to accept just the net amount? I'm in the same boat - bonus paid in January, leaving in December, and they want the full pre-tax amount back. Seems really unfair.

Is there any simple way to handle this retroactively? We're in a similar situation where one partner did 80% of the work this year but we have a 50/50 split. Tax filing deadline is approaching fast.

Unfortunately, retroactive special allocations are problematic. The IRS generally requires that allocations be established in advance of the economic activity. Making changes after the fact often raises red flags. Your best option at this point might be to ensure your operating agreement is updated for future projects, while accepting the default 50/50 allocation for the current tax year. Another possibility, depending on your specific situation, is to consider guaranteed payments to the partner who did more work - this is essentially a payment before profits are calculated. However, this has different tax implications and should be discussed with your tax professional before implementation.

I did it last year with my 2-person LLC. We used a template from our legal service subscription and then had it reviewed by our accountant (much cheaper than having them draft it from scratch). The key elements were: 1) Special allocation provisions that meet the substantial economic effect test 2) Clear tracking of capital accounts 3) Language about how profits from specific projects can be allocated differently Cost us about $400 total for the review and filing the amendment. You definitely don't need to pay $1,500 unless your situation is extremely complex.