Just to add - I had the exact same issue between TurboTax and FreeTaxUSA last year. Turns out TurboTax was handling it correctly. The excess scholarship money (box 5 minus box 1) is considered used for living expenses like room and board, which makes it taxable income. It's super common for FreeTaxUSA to miss this calculation. I even called their customer service and they admitted there was an issue with how their system was handling 1098-T forms in some situations. They might have fixed it by now, but based on your experience, it sounds like they haven't.

Friendly reminder that the difference in calculations shows why it's so important to understand the basic tax rules rather than just trusting software! For education expenses: 1. Box 1 on 1098-T = qualified education expenses paid 2. Box 5 on 1098-T = scholarships/grants received 3. If Box 5 > Box 1, that excess is TAXABLE income 4. This excess goes on Line 8s of Form 1040 as "Taxable scholarships not reported on W-2" This is covered in IRS Publication 970. Many tax software programs miss this or don't explain it clearly!

One important consideration that hasn't been fully addressed is the self-employment tax implications. With an S-Corp, rental income is generally NOT subject to self-employment tax (which is a 15.3% savings), whereas with an LLC taxed as a sole proprietorship or partnership, you might face self-employment tax on the rental income depending on your level of involvement. However, if you're actively managing the property (collecting rent, handling maintenance, etc.), the IRS might argue it's subject to SE tax regardless of entity type. The key is documenting that you're a passive investor rather than actively running a rental business. Also, keep in mind S-Corps have additional compliance requirements - you'll need to file a separate corporate tax return (Form 1120S) and possibly pay yourself a reasonable salary if you're providing services to the corporation. These additional costs and complexities might outweigh the tax benefits for a single rental property. For most small rental property investors, a single-member LLC taxed as a disregarded entity often provides the best balance of simplicity and protection, but definitely consult with a tax professional who can analyze your specific situation.

Another angle to consider is the depreciation recapture implications when you eventually sell the property. With an S-Corp structure, any depreciation you've claimed over the years will be "recaptured" at a 25% tax rate when you sell, regardless of your ordinary income tax bracket at that time. This is particularly important given your situation where mortgage principal payments aren't deductible but depreciation is. You might find yourself in a scenario where you're claiming significant depreciation deductions each year to offset the phantom income from principal payments, but then face a substantial tax bill on sale due to depreciation recapture. One strategy some investors use is a 1031 like-kind exchange when selling to defer the depreciation recapture, but this requires buying another investment property of equal or greater value. The rules are complex and the timelines are strict (45 days to identify replacement property, 180 days to close). Also worth noting - if you're considering this as your first rental property, you might want to start with a simpler structure (like holding it personally or in a single-member LLC) to get familiar with the tax implications before adding the complexity of S-Corp compliance requirements. You can always transfer the property to an S-Corp later, though that might trigger its own tax consequences depending on timing and values.

This is such a helpful thread! I'm in a similar situation - just started monetizing my gaming channel last month and feeling overwhelmed by the tax implications. One thing I've been wondering about is digital vs physical game purchases. Most of my games are digital downloads from Steam, Epic, etc. Do digital receipts work the same way for tax purposes as physical receipts? I'm worried the IRS might question why I don't have traditional paper receipts. Also, what about games I get for free through press kits or review codes? I assume those can't be deducted since I didn't pay for them, but do I need to report their value as income somehow? The record-keeping advice here is gold. I'm definitely going to start that spreadsheet tracking system right away. Better to be over-prepared than scrambling later!

Great question! As someone who's been through this transition from hobby to business, I can definitely confirm that video games are legitimate business deductions for content creators. The key things to remember: 1. Keep detailed records of every purchase - game title, cost, purchase date, and which videos/content you used it for 2. You can only deduct the business portion if you also play for personal enjoyment (be honest about the split) 3. Make sure you're treating this as a real business - separate bank account, proper bookkeeping, genuine intent to profit Since you just got into the YouTube Partner Program, now's the perfect time to start organizing your finances properly. You'll be filing Schedule C as a sole proprietor once you start earning revenue. One heads up - don't go crazy buying every new release just for deductions. The IRS wants to see that your purchases are "ordinary and necessary" for your specific type of content. If you're doing horror game reviews, buying the latest sports games might raise questions. Good luck with your channel! The tax side gets easier once you establish good habits from the start.

Don't forget about the 50% rule for meals! I made this mistake last year and had to do an amended return. You can only deduct 50% of your meal costs even if they're 100% business related. There's a temporary exception where some business meals were 100% deductible in 2021-2022, but that's gone now.

Great question! As someone who's been doing freelance work for a few years, I can confirm that both meals and mileage are legitimate business deductions when done properly. A few additional tips that haven't been mentioned yet: For meals, keep a brief note about the business purpose of each meeting - even just "discussed Q2 project proposal with potential client" is sufficient. The IRS wants to see a clear business connection, not just that you had lunch. For mileage, I'd strongly recommend the standard mileage rate (67.5 cents/mile for 2025) over actual expenses unless you have a very expensive car or do tons of business driving. It's much simpler and usually comes out about the same. One thing to watch out for: if you work from home as your main office, trips from home to clients ARE deductible. But if you have a separate office space that you rent, then trips from home to that office are considered commuting and not deductible. Also consider tracking other business expenses like client parking fees, tolls during business trips, and even business-related phone calls. These smaller deductions can really add up over the year!

One approach I haven't seen mentioned yet - have you considered taking a minimal owner's draw from your C Corp to at least cover your health insurance premiums? My accountant had me do this with my startup and then we documented it as a reimbursable business expense using an accountable plan. This gave me the tax advantages while still maintaining proper corporate structure during pre-revenue phase. It's worth asking your tax pro about this approach!

As someone who went through this exact situation with my C Corp startup, I can confirm that Sofia is absolutely correct - C Corps don't have "owner's draws" like LLCs do. Any money you take out has to be structured as salary (subject to payroll taxes), a loan (which needs to be documented and repaid), or dividends (which are taxed at capital gains rates but only make sense if the corp has profits). For your health insurance situation, Andre, here's what I learned after making some mistakes in my first year: Since you paid the premiums personally without any corporate involvement, you're limited to claiming them as itemized medical expenses on Schedule A for 2023. The 7.5% AGI threshold makes this pretty useless unless you have significant other medical expenses. Going forward, definitely set up a formal Health Reimbursement Arrangement (HRA) through your C Corp. Even without revenue, if you have any startup capital or investor funds, you can pay yourself a minimal salary and have the corp reimburse your health premiums as a tax-free employee benefit. The corp deducts the expense, and you don't pay taxes on the reimbursement. Much better than the Schedule A route! I wish I had known about this structure from day one - would have saved me a lot in taxes and headaches.