YNAB You Need A Budget

[unula]

Hello All! I'm fairly new to YNAB (been going a few months now not much progress but definitely more aware of spending, which is a start!) and as the end of the year approaches, I've decided that I want to do mine and my husbands own taxes this year. (it's our first year as a married couple, prior to this his mother has always done them for both of us and after having her show me last year and seeing how much she just ~guessed and filled in numbers, it terrified me. So I thought I'd give it a try myself with the help of TurboTax)

After doing some research I think I've answered almost all of my questions, except a few - how does the home office deduction work? More specifically - can I use it for my husbands situation? (see below)

My husband wants to be an MMA fighter/teach MMA once he retires, in his own gym - he has a day job, but he also goes to the gym for 2 hours a night, 5 days a week PLUS his training in our extra room/makeshift gym. He hasn't made any money at it at this point, but has certainly poured money into it. And is hoping to get a few fights in early next year. So, does this qualify as a home office since the sole purpose of the room is for his training and he wants to turn that into a full time career?

If it does, how do I do it with a program such as TurboTax? (Last year, his mother just ~created a business and entered a bunch of info. For some reason it seemed really sketchy to me, but maybe that's how it's done?) I've tried googling and I can't find anything about mma (or even boxing) and taxes.

Thanks for reading this novel and all of ya'lls help! Any help would be amazing at this point!

[jessiebird]

Congratulations on coming to YNAB and on your husband's business plans.

I think you do need to see a tax professional until your husband gets his business established. In the meantime, perhaps googling something similar, such as "self-employed personal trainer" or some other business that can be done out of a space at home and has similar equipment needs.

My husband can claim a home-office deduction because he is self-employed as a contractor and has an office in our home. So we can deduct a percentage of home expenses such as utilities as a percentage of square footage of the house. (I have done my own taxes for three years and this past year I didn't even claim this deduction because it's a common flag for audits and even though it's legit I got scared! I'm going to see an accountant this year. )

Basically anything your husband uses toward the business can be claimed for tax purposes. However, you should find out what the cutoff point is between hobby and business. I think there is a distinction based on income; you can run a business at a loss for three years or something and then after that it's considered a hobby. If he wants to consider it a business he will have to file a Schedule C. Again, I'm sure there is plenty of info online if you google something about hobbies versus businesses. I'm not sure if regular Turbo Tax has a Schedule C available or if you have to bump up to the small business level but the Turbo Tax website has a chart that can help you decide which form you use.

But I do think to get off the ground it would be best to see a professional. Good luck with everything!

[samuelbritt]

I say pay what you want in taxes and tell your MMA husband to beat up any pencil-neck IRS types that show up at your door.

[unula]

@jessiebird Thanks for the advice! I was trying to avoid seeing a professional, because we're from a very small town and all the "professionals" are either people we went to high school with, or their moms and word gets around how much everyone makes, and it makes me uncomfortable. Might be time to branch out and head to the big city!

His mom used TurboTax Deluxe last year and there was a Schedule C in our taxes (just checked, haha.) She just like, made up numbers last year, and she's been doing of our taxes for years and I never thought anything about it until I sat with her last year and watched what she did. Now I'm freaking out we're going to be audited! So, I'm trying to learn as much as I can to get us on the right track.

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@samuelbritt - HAHA! At 6'4" most people ran away from him ~before he was basically the muscly wall, he is now. So, I'm sure the auditor would definitely run away!

[brad]

I didn't even claim this deduction because it's a common flag for audits and even though it's legit I got scared! I'm going to see an accountant this year. )

Same here -- I've been working at home for more than 20 years now, but most of that time has been as a full-time employee of a company. I tried deducting my home office and related expenses, but it triggered an audit once and the process was so time-consuming and so full of hassles that I decided it wasn't worth the bother anymore. The benefit of the deduction was pretty small and not worth the risk. I think that's the calculation you have to do: figure how much you'd save from the deduction, and decide whether the deduction is worth the 30-40 hours of filling out forms, corresponding with the IRS, providing receipts, etc. that would occur if you're audited.

[unula]

Thanks everyone for your help! I ended up calling the free TurboTax support line offer I received when we bought our disk last year. They basically told me the same thing - claiming the home office right now wouldn't be worth it, if it triggered an audit. Thanks, again!