The key to avoiding the hobby loss rule is showing that you're running your D&D sessions as a business with the intent to make a profit. Keep good records, have separate business accounts, track all expenses properly, create a business plan, and be professional about how you operate. The IRS generally uses a "3 out of 5" guideline - if you show a profit in 3 out of 5 consecutive years, they typically consider it a legitimate business. Since OP mentioned they were "hit hard with taxes," it sounds like they're profitable, which helps their case significantly.

That makes sense, thanks! I've been profitable 2 of the last 3 years, so I think I'm on the right track. I do have separate tracking for all my game master income and expenses, but I should probably open a dedicated bank account to make it even clearer.

Thanks for breaking this down! So for my $7,800, if I have say $1,200 in expenses for software, equipment etc., I'd pay the SE tax on $6,600, right? And should I be making quarterly payments even though I just started mid-year?

Yes, if you have $7,800 in income and $1,200 in legitimate business expenses, you'd pay SE tax on the $6,600 net profit. The SE tax would be about $1,010 (15.3% of $6,600). For quarterly payments, if this is your first year with self-employment income, you might qualify for an exception to the penalty. However, it's generally a good idea to start making them as soon as you realize you'll have tax liability. For the current year, you can catch up by making larger payments in the remaining quarters. The IRS website has a form (1040-ES) to help calculate your estimated payments.

The QBI deduction is amazing! But isn't there an income limit? I think I remember reading somewhere that it phases out if you make too much.

Thank you for this perspective. Could you clarify about the FMLA part? I thought that only applied to companies with 50+ employees, and we only have 9 total. Are there similar protections for smaller businesses?

You're absolutely right about FMLA - it only applies to companies with 50+ employees, so your company is too small to be required to provide that protection. I should have been more clear. However, many states have enacted their own family leave laws that extend to smaller businesses. Depending on where you live, there might be state-specific protections even though you're not covered by federal FMLA. For example, some states require even small employers to provide job protection and/or paid leave. That's definitely worth looking into based on your specific location.

The fraud part is the intentional misrepresentation. If they're specifically timing a "layoff" to coincide with maternity leave and have already promised to bring her back at a specific date, that's not a true layoff - it's a planned temporary absence that they're trying to disguise as a layoff to shift costs to the state. A legitimate layoff would be based solely on business needs, not timed specifically to coincide with a planned medical event, and wouldn't come with a guaranteed rehire date.

Thanks for the perspective! Did you find that you were able to itemize deductions right away in your first partial year of homeownership? Or did it take a full year of mortgage interest before it made sense?

In my first partial year, I wasn't able to itemize because I only had about 4 months of mortgage interest which wasn't enough to exceed the standard deduction. I just took the standard deduction that first year. It wasn't until my first full calendar year of homeownership that itemizing made sense. But it's still worth running the numbers both ways in TurboTax (itemized vs standard) to see which gives you the better outcome. The software makes this comparison pretty easy.

What states still have good homebuyer tax breaks? I'm in Pennsylvania and when I asked my lender they said there weren't any tax breaks, just loan programs for first-time buyers.

California still has some good ones! My friend just bought her first home and got a $10,000 credit through some state program. Definitely worth checking.

Thank you, I hadn't even thought about all those other tax benefits that would be affected. We do have some student loan interest and education credits that would be impacted. Looks like filing jointly and taking the premium tax credit hit is even more clearly the right move than I initially thought.

Happy to help! Yeah, the MFS status really limits a lot of tax benefits, which is why it's rarely the optimal choice unless there are very specific circumstances. The premium tax credit "marriage penalty" is frustrating, but thankfully it's just a one-time adjustment you're dealing with. Next year you'll be able to plan your insurance coverage for the full year as a married couple and avoid this issue completely.

This is really smart. I did this exact thing last year. Was going to owe $2,400 in premium tax credits after getting married, but maxed out my HSA ($3,850) and put another $2,000 in my traditional IRA. Dropped our MAGI just enough to reduce the repayment to only $800. Definitely worth looking into!

I hadn't thought about this angle! We do have some room to make additional retirement contributions. I'll need to check exactly how close we are to the next MAGI threshold for the premium tax credits. Even if it just reduces the amount a bit, that's still a win since we'd be putting money into our retirement rather than just paying it to the IRS. Thanks for the suggestion!