Important note: check if you're eligible for the Self-Employed Health Insurance Deduction! If either of you has any self-employment income (even a side gig), you might be able to deduct health insurance premiums up to the amount of your net self-employment income. This is an "above-the-line" deduction, meaning you don't need to itemize to claim it.

Based on what you've described, the $450 monthly stipend is definitely taxable income that should already be included in your wife's W-2. Since her employer doesn't offer a qualified health plan, any cash assistance they provide is treated as regular wages. For the premium deduction, you have a couple of options to explore: 1. **Medical expense deduction on Schedule A** - You can deduct health insurance premiums as medical expenses, but only if you itemize AND your total medical expenses exceed 7.5% of your AGI. With $86K income, you'd need over $6,450 in medical expenses for any deduction. 2. **Self-employed health insurance deduction** - If either of you has any self-employment income (1099 work, side business, etc.), you might be able to deduct premiums as an above-the-line deduction without itemizing. Regarding the Premium Tax Credit - this is only available if you purchased insurance through the official Health Insurance Marketplace (Healthcare.gov or your state exchange). If you bought directly from an insurer, you won't qualify regardless of income. One thing to double-check: make sure your wife's employer isn't operating under a QSEHRA or ICHRA arrangement, which would have different tax treatment. Though with 200+ employees, a QSEHRA wouldn't be available anyway. The key is getting that W-2 and confirming the stipend is properly included in taxable wages!

One important thing to keep in mind is the timing of when you establish residence vs when you start claiming it as your primary residence for tax purposes. The IRS looks at where you actually live for the majority of the year, so if you're renovating for 3-4 months while still renting in town, you'll want to be careful about when you officially claim the cabin as your primary residence. I'd suggest keeping detailed records of when you actually move in full-time (utility hookups, mail forwarding, voter registration change, etc.) and use that date as your official residence change date for tax purposes. Don't try to claim it as primary residence while you're still primarily living in the apartment - that could create issues if audited. Also, since you mentioned this is raw land, make sure the cabin renovation meets local building codes for habitable structures. The IRS generally expects a primary residence to be a structure suitable for year-round occupancy with basic amenities (plumbing, electricity, heat). Document the improvements you make to ensure it meets these standards.

This is a great question and I can see you've gotten some solid advice already! Just wanted to add a few points from someone who went through a similar process last year. One thing I learned the hard way is to document EVERYTHING from day one. I created a simple spreadsheet tracking all expenses (renovation materials, utilities, loan payments, etc.) and categorized them as either "personal residence" or "farm business" related. This saved me tons of time at tax season and would be crucial if ever audited. Also, regarding the mortgage interest deduction - keep in mind that with the current standard deduction being so high ($13,850 for single filers in 2023), you might not benefit from itemizing unless you have other significant deductions. Run the numbers both ways to see what actually saves you more money. One last tip: consider consulting with a tax professional who specializes in agricultural properties before you finalize your setup. The upfront cost is usually worth it to make sure you're structuring everything optimally from the start, especially with the complexity of mixed-use property. Better to get it right initially than try to fix it later! Good luck with your farm venture - sounds like an exciting project!

Anyone know if mortgage insurance premium can also be partially deducted as part of home office expenses? I'm putting down less than 20% so I'll have PMI, and wondering if I can deduct the business percentage of that too.

Just want to add some clarification on timing for new homebuyers - you can start claiming home office deductions immediately once you move in and begin using the space exclusively for business, even if you bought the house partway through the tax year. You'll need to prorate your deductions based on the number of months you actually lived in and used the home office. So if you close on your house in July and use 10% of it as an office, you'd calculate 10% of 6 months worth of eligible expenses (mortgage interest, property taxes, utilities, etc.) for that tax year. Also remember that when you eventually sell your home, you'll need to "recapture" the depreciation you claimed on the business portion, which gets taxed as ordinary income up to 25%. This is why it's important to keep detailed records of all your home office deductions over the years. The tax benefits are great while you own the home, but there are consequences down the road when you sell.

I've been wrestling with this exact same issue for months! After reading through all these responses, I'm leaning toward either the S-Corp election or adding a family member as a small percentage owner. Quick question for those who've gone the partnership route - how do you handle the K-1 distributions to your spouse/family member? Do they actually need to be involved in the business operations, or can it be purely a paper arrangement? I'm worried about creating unnecessary complications with someone who doesn't really understand the business side of things. Also, has anyone had experience with state-level complications when making these changes? My state has pretty strict LLC regulations and I want to make sure I'm not creating problems at the state level while trying to solve federal tax issues.

I've been following this thread with great interest since I'm in a very similar situation. One thing I haven't seen mentioned yet is the potential impact on business insurance and liability protection when making these structural changes. When I was researching the S-Corp election option, my business insurance agent warned me that changing tax classifications could affect my professional liability coverage and potentially require policy updates. Has anyone dealt with insurance complications after making these changes? Also, for those who added family members as LLC partners - did you need to update your business insurance to include them as additional insured parties? I'm trying to weigh all the costs and complications before deciding which route to take, and insurance considerations seem like they could be a significant factor that's often overlooked in these discussions.

I'm going through a very similar situation right now! Had an unexpected contract payment come through that's throwing off all my marketplace calculations. Reading through everyone's experiences here is really helpful. One thing I learned from my tax preparer is that you might want to look into making estimated tax payments for this quarter if you haven't already. Since you're now paying a higher premium, you're getting less advance premium tax credit, which means you might actually get a refund instead of owing money at tax time - depending on your withholdings. Also, definitely keep all your documentation about when you reported the income change to the marketplace. The fact that you updated it immediately shows good faith compliance, which could be helpful if there are any questions later. The retirement contribution strategy mentioned above is gold - I'm maxing out my 401k for the rest of the year specifically because of this situation. Every bit helps bring that MAGI down!

I work as a tax advisor and see this situation frequently during tax season. The key thing to remember is that you're being evaluated on your total annual income, not monthly spikes. Since you reported the change immediately, you've done everything right from a compliance standpoint. Here's what I typically tell clients in your situation: First, calculate what your new projected annual income will be with this windfall included. Then look at the income thresholds for your household size - if you're still under 400% of Federal Poverty Level, your repayment will be capped even in a worst-case scenario. The retirement contribution strategy others mentioned is absolutely your best friend here. You can contribute up to $23,000 to your 401(k) for 2025 ($30,500 if you're 50+), and every dollar reduces your MAGI. If you're self-employed or have 1099 income, a SEP-IRA might allow even higher contributions. Also consider: if you have any medical expenses you've been putting off, HSA contributions (if eligible), or even timing certain deductible expenses before year-end. The goal is to bring your MAGI down to a more favorable bracket. Don't panic about the $17,550 scenario - that would only happen if your total annual income ends up being dramatically higher than expected AND you're above certain thresholds. Since you've already adjusted your premium payments going forward, you're minimizing that risk significantly.