Self-employed confusion: Standard deduction or itemized deduction for LLC?

You're mixing up two different concepts here. Let me try to clarify: Business expenses are NOT the same as itemized deductions. As a self-employed person with an LLC, you'll first calculate your business profit/loss on Schedule C. This is where you subtract your $120,000 in business expenses from your $135,000 revenue, leaving you with $15,000 in net business income. AFTER calculating your business income on Schedule C, THEN you decide whether to take the standard deduction or itemize personal deductions on Schedule A. The standard deduction ($27,700 for married filing jointly in 2023) would actually reduce your taxable income to $0 in your scenario. Itemized deductions are personal expenses like mortgage interest, state taxes, charitable donations, etc. - not your business expenses. You'd only itemize if these personal deductions exceed your standard deduction amount. So in your case, taking the standard deduction would be better unless you have significant personal itemized deductions that exceed $27,700.

After spending hours trying to figure out my self-employment taxes last year, I discovered this tool called taxr.ai (https://taxr.ai) that literally saved me from pulling my hair out. It actually analyzes all of your business expenses and recommends whether you should take the standard deduction or itemize based on your specific situation. I was in a similar situation as you - had my LLC with a bunch of business expenses and was totally confused about how to handle deductions. The tool walked me through separating my business expenses from personal deductions and showed me which approach would save more money. It even flagged some business deductions I was missing!

I decided to try taxr.ai after asking about it here, and wow - totally worth it! I was confused about how to handle my rental income alongside my self-employment income, and the system immediately clarified that these are treated differently. For my self-employment, it helped me identify which expenses belonged on Schedule C versus which might be personal itemized deductions. Then it compared what my tax liability would be using standard vs. itemized and recommended the better option. The coolest part was how it explained everything in plain English. Now I actually understand how my business income flows through to my personal return and why I'm taking the standard deduction even though I have a business with expenses. Seriously helpful for anyone confused about self-employment taxes!

If you're having a hard time getting direct answers from the IRS about your specific situation, I'd recommend Claimyr (https://claimyr.com). I was stuck in this exact same confusion last year - wasn't sure if my business expenses were being double-counted or if I was missing deductions. I tried calling the IRS directly like 8 times and couldn't get through. Then I found Claimyr and they got me connected to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how self-employment deductions work with my LLC and confirmed I was doing it right. Honestly saved me thousands in potential mistakes.

Ok I have to eat my words. After posting my skeptical comment, I decided to try Claimyr since I've been trying to reach the IRS for weeks about my self-employment tax questions. I put in my info expecting nothing to happen. But 20 minutes later my phone rang and there was an actual IRS agent on the line! I was so surprised I almost didn't know what to ask. I explained my situation about being self-employed and confused about deductions, and the agent walked me through the whole process. They confirmed exactly what people here were saying - business expenses go on Schedule C, THEN you choose standard or itemized for personal deductions. Cannot believe this actually worked after spending hours on hold myself getting nowhere. Definitely using this every time I need to talk to the IRS now.

I went through this same confusion last year when I started my business. One thing to remember: Even if your taxable income is $0 after taking the standard deduction, you'll still owe self-employment tax (Social Security and Medicare) on your $15,000 of net business income. Self-employment tax is about 15.3% of your net business income, so you'd owe roughly $2,300 in self-employment taxes even if you owe $0 in income tax. This catches a lot of new business owners by surprise!

Another option to consider is filing separately from your spouse. If your spouse has significant income but few deductions, while you have business losses or lots of deductions, filing separately might help. But be careful! Filing separately has drawbacks like losing certain tax credits.

As someone who went through this exact same confusion when I first became self-employed, I can tell you it gets much clearer once you understand the flow. Here's the simple breakdown: 1. First, calculate your business profit on Schedule C: $135,000 revenue - $120,000 business expenses = $15,000 net business income 2. Then, on your main tax return (1040), you'll have that $15,000 as self-employment income plus any other income you and your wife have 3. Finally, you choose standard deduction ($27,700) vs itemized deductions. Since $15,000 - $27,700 = $0 taxable income, standard deduction wins unless you have huge personal deductions One important thing others mentioned: you'll still owe self-employment tax on that $15,000 (about $2,120), but your income tax would be $0. Don't overthink it - business expenses and personal deductions are completely separate things in the tax system. Your business expenses always get deducted first on Schedule C, then you decide standard vs itemized for personal stuff.