Thanks for mentioning state requirements! We're in Michigan - do you know if web design services are subject to sales tax here? And for the business license, would we need one for each partner's home location since we work remotely?

In Michigan, services like web design generally aren't subject to sales tax (they focus more on tangible products), but if you're selling actual digital products like templates or hosting, that could potentially be taxable. Check with Michigan Treasury to be sure. As for business licenses, since you're operating as a partnership, you typically only need one license for the business entity itself, not for each partner. However, if all partners work from different municipalities, you might need to check local regulations for each area. Some cities have different requirements for home-based businesses. Usually registering in the location where your business is primarily managed is sufficient.

Schedule B is for individual returns, not partnership returns, right? I thought partnerships use different schedules with the 1065?

Do student loans really count as the student providing their own support? I thought since they're loans that need to be paid back later, they wouldn't count for the current tax year?

Yes, student loans absolutely count as support provided by the student for the current tax year, regardless of when they'll be repaid. The IRS looks at who paid the expenses during the tax year, not where the money originally came from. Even if your parents cosigned the loans, as long as you're legally obligated to pay them back, the tuition and expenses paid with those loan funds count as support you provided for yourself. The same applies to scholarship funds - those count as support you provided (not support from your parents), even though the money comes from a third party.

The IRS actually contacted you both about this? How long did it take for them to notice the duplicate dependency claim?

It happened pretty fast! We both filed in February, and by April we each got letters asking for documentation. The duplicate dependency claim triggered an automatic flag in their system. The IRS actually put both of our refunds on hold until the issue was resolved. My parents had to pay back the extra refund they received from claiming me plus a small penalty. The whole process took about 3 months to resolve completely. Definitely not something you want to deal with during finals or job hunting!

Thanks for the tip! My dad gets a small social security check ($843/month) but it all goes toward his medications that aren't covered by Medicare. Would that count against the income limit? And yes, I've been keeping all receipts for household expenses since I had a feeling this might come up.

Social Security benefits do count toward the gross income test for dependency, so that's about $10,116 annually. For 2024, the gross income limit for dependents is $4,700, so your father's income is over that threshold. However, there's still a way you might qualify for head of household. Even if your father doesn't meet the gross income test to be your dependent, he might still be considered your "qualifying relative" for head of household purposes if you provide more than half his support and he meets the other tests. This is a special exception specifically for parents. Keep documenting everything - especially showing how his SS income is spent entirely on his medical needs and how you cover everything else.

That's really helpful to know! My mom lives in her own apartment but I pay for everything. I've been filing as single all this time... wonder if I should amend my past returns?

What about uniforms and equipment? I'm guessing my security uniform is deductible but what about boots, flashlights and that kind of stuff?

Uniforms are typically deductible if they're required for your job and not suitable for everyday wear. So generic black pants probably wouldn't qualify, but a shirt with a security company logo would. Equipment like flashlights, specialized boots, and other gear is generally deductible if it's specifically required for your security work and not something you'd use outside of work. Keep all receipts and document how each item is used specifically for work purposes. Small items under $200 can often be fully deducted in the year purchased, while more expensive equipment might need to be depreciated over several years.

I used TurboTax Self-Employed last year for my security consulting business. It does have some industry-specific questions but honestly wasn't great for the more nuanced deductions. It asked about standard business expenses but didn't really guide me through the professional development stuff. I ended up upgrading to their Live service to talk to a tax expert about my martial arts training.

Thank you for bringing this up! I actually do have student loans, so that's really helpful to know. Do you know roughly what income level the student loan interest deduction starts to phase out? And would HSA contributions have the same effect of lowering my AGI?

The student loan interest deduction starts phasing out at $75,000 for single filers and $155,000 for married filing jointly in 2024. Since you mentioned making $72,000, you're right at the edge where increasing retirement contributions could make a big difference. And yes, HSA contributions absolutely lower your AGI in the same way 401k contributions do! Both HSA and traditional 401k contributions are pre-tax and reduce your adjusted gross income. This can help you qualify for credits and deductions that have income limitations. In your case, both strategies would work together to potentially keep you fully eligible for the student loan interest deduction.

Generally: HSA first if you have matching funds for it (rare), then 401k up to employer match, then max HSA, then back to 401k. HSA has better tax advantages than 401k since withdrawals for medical expenses are tax-free (401k withdrawals are always taxed as income).