This entire discussion has been incredibly enlightening! As someone who's been collecting unemployment for the first time this year, I was completely confused about how it affects my tax credits. I had no idea that unemployment benefits don't count as earned income for EIC purposes - I honestly thought all income was treated the same. Reading through everyone's experiences and explanations really helped me understand that the IRS makes a clear distinction between money earned from actual work versus benefits received when you can't work. I was worried I wouldn't qualify for any credits since I was unemployed for several months, but now I realize that my earnings from the beginning of the year before my layoff should still qualify me for EIC. I'm definitely going to follow the advice about double-checking the EIC worksheet in my tax software to make sure it's only counting my W-2 wages and not including my unemployment compensation. It's reassuring to know that even in a difficult year with job loss, there are still tax benefits available to help families get by. Thanks to everyone who shared their knowledge and experiences - this community is incredibly helpful for navigating these confusing tax situations!

This has been such a comprehensive discussion! As someone who works in tax preparation during filing season, I see this exact confusion come up constantly. What I find helpful is explaining to clients that the IRS essentially has different "buckets" of income for different purposes. For the Earned Income Credit, they're very strict about what goes in the "earned income" bucket - it has to be compensation you received for actually working. Unemployment compensation, even though it's taxable, goes in a different bucket because it's a government benefit program, not payment for services performed. Beatrice, your instinct was absolutely correct to question your tax software. While most modern tax programs handle this correctly, it's always smart to verify. With your $16,500 in wages and two qualifying children, you should receive a substantial EIC - likely in the $5,000+ range based on current tables. One final tip for everyone: if you're ever unsure about these distinctions, Publication 596 from the IRS has detailed explanations and examples of what counts as earned income for EIC purposes. It's surprisingly readable for an IRS publication and can help you feel confident about your calculations.

I'm in a similar situation with a shared apartment but hadn't thought about the exclusive use requirement that Sofia mentioned. Since you mentioned the second bedroom is "exclusively used" for your business, make sure you can truly prove that if audited. One thing I'd add to the great advice already given - keep detailed records of everything. Take photos of your office setup, save all rent receipts, and document that 13% square footage calculation with measurements and a floor plan sketch. The IRS loves documentation, especially for home office deductions. Also, double-check your state tax rules too. Some states have different requirements or don't allow the federal home office deduction, so you might need to calculate things differently for state vs federal returns. For your van parking expense, definitely keep that separate on Schedule C as others suggested. That $125/month adds up to $1,500 annually, which is a solid business deduction you don't want to dilute by mixing it into your home office calculation.

One additional consideration for your situation - since you're splitting rent 50/50 with your partner, make sure you're clear on who can claim what if your partner also works from home or has any business use of the apartment. Only one person can claim the home office deduction for a specific space, so if there's any overlap in business use areas, you'll need to coordinate to avoid both of you claiming deductions for the same square footage. Also, keep in mind that if you ever move or your living situation changes, you'll need to recalculate everything based on your new space and rent amounts. The 13% calculation is specific to your current apartment layout and rent split. For record-keeping, I'd recommend creating a simple spreadsheet tracking your monthly rent payments, the calculated office percentage, and your van parking expenses separately. This makes it much easier when tax time comes around and you need to total everything up for the year. Plus having organized records like this can be a lifesaver if you ever face an audit. The advice about checking state tax rules is crucial too - some states like New York have specific limitations on home office deductions that differ from federal rules, so definitely verify what applies in your state.

Has anyone considered the self-employment tax implications here? If you put the equipment rental on Schedule C, you'll pay an additional 15.3% SE tax on the net income, which you wouldn't pay if it's on Schedule E. This made a HUGE difference in my situation - I had about $20k in equipment rental income, and putting it on Schedule C vs E was about a $3k difference just in SE tax! Something to consider if you're right on the edge between active and passive involvement.

Great discussion here! As someone who went through a similar situation with inherited equipment, I wanted to add a few practical considerations that might help with your decision. One thing I learned the hard way is that if you're planning to rent this equipment regularly (3-4 times monthly as you mentioned), you'll definitely want to look into commercial liability insurance. Your personal or existing business insurance likely won't cover equipment rental activities, and construction equipment carries significant liability risk. Also, since you mentioned the equipment is unrelated to your IT consulting, consider whether mixing it into your existing LLC is the best approach. While you CAN have multiple business activities under one LLC, there are liability and operational reasons why you might want to keep them separate. If someone gets injured using your construction equipment, you don't want that to potentially impact your IT consulting business. From a tax perspective, given your level of planned involvement (website, maintenance, delivery), Schedule C definitely seems appropriate. Just make sure you're prepared for the self-employment tax implications that Aurora mentioned - it's a real cost to factor into your pricing. One last tip: start tracking your time spent on equipment rental activities from day one. The IRS loves documentation about your level of involvement if they ever question your Schedule C classification.

Do yall know if there's a required minimum resolution for the photos? Some of my receipts are kinda faded and I'm worried my phone camera isn't capturing everything.

Great question! I've been doing the digital receipt thing for about three years now and can confirm the IRS absolutely accepts photos of receipts. The key is making sure they're readable and contain all the essential info - date, vendor, amount, and description of what was purchased. One thing I'd add that hasn't been mentioned yet is to be consistent with your photo quality. I always take photos immediately after purchases while the receipt is still crisp, use good lighting, and make sure the entire receipt fits in the frame. I've seen people try to piece together receipts from multiple photos during audits and that gets messy fast. Also, don't forget about receipts for cash purchases under $75 - technically you don't need a receipt for business expenses under that amount, but having photo documentation makes your life so much easier if questions come up later. Better safe than sorry!

I'm in the same exact situation! Filed through TurboTax in early April, got my federal refund last week, but Indiana is still showing "processing" on their website. It's really frustrating not knowing when to expect it, especially when you're counting on that money. Based on what everyone is saying here, it sounds like 3-4 weeks after federal is pretty normal for Indiana this year due to their new fraud prevention measures. I'm trying to be patient but it's hard when the status updates are so vague. Hopefully we'll both see movement soon!

I'm experiencing the exact same thing! Filed my taxes through TurboTax in early April, received my federal refund about a week ago, but my Indiana state refund is still showing "processing" on their website. It's reassuring to read through all these comments and see that so many others are dealing with similar delays - at least we know we're not alone in this situation. From what everyone is sharing here, it sounds like Indiana has implemented additional fraud prevention measures this year that are causing these 3-4 week delays after receiving federal refunds. The waiting is definitely frustrating, especially when you're counting on that money, but it seems like most people are eventually getting their refunds processed. I'm going to try to be more patient and maybe check the status less frequently since it doesn't seem to update very often anyway. Thanks for posting this question - it's really helpful to hear everyone's experiences and timelines!