As a teacher myself dealing with similar loan situations, I wanted to add something important that might help with your long-term planning. While you're right to keep the Parent Plus loans in your dad's name to preserve forgiveness options, make sure you're also maximizing your own federal loan benefits. Since your income-based payments are currently $0, you're still getting credit toward Public Service Loan Forgiveness (PSLF) if you're working for a qualifying employer. Those $0 payments count as qualifying payments! Make sure you're submitting your annual employment certification forms to track your progress. Also, depending on your teaching situation, you might qualify for Teacher Loan Forgiveness after 5 years of service, which could forgive up to $17,500 of your federal loans. This is separate from PSLF and could be worth pursuing even if your current payments are $0. Just wanted to make sure you're aware of all your options since the Parent Plus situation is already locked in terms of tax benefits!

Just wanted to add one more consideration that might help with your overall strategy. Since you're a teacher and dealing with both Parent Plus loans and your own federal loans, you might want to look into whether your school district offers any loan repayment assistance programs. Some districts have started offering loan repayment benefits as recruitment/retention tools, especially in high-need areas or subject areas. Even if they can't help with the Parent Plus loans directly (since those aren't in your name), any assistance with your own loans could free up money in your budget to help with the Parent Plus payments. Also, if you're not already, make sure you're taking advantage of the Educator Expense Deduction on your own taxes. You can deduct up to $300 for classroom supplies and materials you purchase with your own money. It's not huge, but every little bit helps when you're juggling multiple loan payments! The tax situation with Parent Plus loans is frustrating, but at least you're being strategic about keeping your forgiveness options open. That's really smart long-term thinking.

Wait I'm still confused. If I have $50k in regular income and $200k in long term capital gains, does that mean my regular income gets taxed at the rates for someone making $250k? Or does it get taxed at the rates for someone making $50k?

This is such a common source of confusion! I went through the exact same thing when I first started investing. The key insight that helped me was thinking of it like two separate "buckets" - your ordinary income bucket and your capital gains bucket. Your $13k in wages gets taxed exactly like it would if that was your only income - it doesn't matter that you have $125k in capital gains sitting alongside it. The capital gains are in their own separate calculation. But here's the part that trips people up: while your ordinary income doesn't get pushed into higher brackets by capital gains, your TOTAL income ($138k) does determine what rate you pay on those capital gains. So you'd likely pay 15% on your long-term gains, but your $13k in wages would still be taxed at the regular income rates for someone making $13k. Think of it as your ordinary income "filling up" the tax brackets first, then your capital gains get stacked on top using their own separate rate table. The IRS basically runs two parallel calculations and adds them together.

This is such a helpful thread! I'm actually in a similar situation but with a twist - I'm considering forming an LLC for my vending machine business instead of staying as a sole proprietor. Has anyone here made that transition and can speak to the tax implications? From what I've researched, an LLC can elect to be taxed as a sole proprietorship (disregarded entity), S-corp, or C-corp. I'm wondering if the S-corp election might save on self-employment taxes once the business gets to a certain profit level, since you only pay SE tax on reasonable salary rather than all profits. Also curious about the liability protection aspect - with machines in multiple locations, I'm a bit worried about potential slip-and-fall incidents or other liability issues. Would love to hear from anyone who's navigated these decisions for their vending business!

This is such a comprehensive discussion! As someone who's been running a small vending operation for about 18 months now, I wanted to add a few practical tips that might help: **Record-keeping tip**: I use a simple binder system where I keep receipts organized by month, plus a basic spreadsheet tracking revenue by location. Makes tax time much smoother than trying to reconstruct everything from memory. **Location agreements**: Make sure you get written agreements with your locations, even if it's just a simple one-page document. This helps establish the legitimacy of your business and makes those location fee deductions much cleaner if you ever get audited. **Seasonal considerations**: Don't forget that vending revenue can be seasonal - my machines do much better in summer months. This affects your estimated tax calculations, so consider using the annualized income method mentioned earlier if your quarterly income varies significantly. **Insurance**: While we're talking about LLCs and liability, don't overlook getting proper business insurance. It's relatively inexpensive for vending operations and adds another layer of protection beyond just the corporate structure. One last thing - if you're handy with basic repairs, keep receipts for small parts and tools. Things like coin mechanisms, bill validators, and even basic cleaning supplies are all legitimate business expenses that can add up over the year. Best of luck with your business! You're definitely on the right track asking these questions upfront.

Something nobody's mentioned is the reasonable compensation issue after you convert. The IRS really scrutinizes S-corps that don't pay reasonable salaries to owner-employees. Since you didn't take any salary in 2023 as a C-corp, make sure you establish a reasonable salary for yourself in 2024 as an S-corp. The IRS loves to audit S-corps with owners taking all profit as distributions and little/no salary to avoid payroll taxes.

One thing I'd add to the discussion about retained earnings - make sure you understand the "built-in gains tax" that can apply to converted S-corps. If your C-corp had unrealized gains on assets when you converted, those gains could be subject to corporate-level tax if you sell those assets within 5 years of conversion. This doesn't directly affect your $78K of cash retained earnings, but if your business has appreciated assets (equipment, real estate, inventory, etc.), you'll want to factor this into your planning. The built-in gains tax is designed to prevent companies from converting just to avoid corporate tax on pre-conversion appreciation. Also, keep detailed records of your asset values at the conversion date - you'll need this information for years to come. Your accountant should help you prepare a "built-in gains statement" as part of the conversion process.

I just went through this exact process last month! The advice about getting an ITIN is correct - you'll need to file Form W-7 with your joint return and write "APPLIED FOR" where her SSN would go. One thing I learned the hard way: make sure you have ALL the required documentation ready before you submit. The IRS is very strict about what they'll accept for identity verification. Original documents or certified copies from the issuing agency only - no photocopies or notarized copies. Also, consider timing carefully. If you're expecting a large refund, the 6-8 week delay for ITIN processing might be worth it for the tax savings of filing jointly. But if the refund is small and you need the money soon, filing separately might make more sense this year. The good news is this is a one-time hassle - once she gets her SSN through the immigration process, future tax years will be much simpler!

I'm actually going through this same process right now with my husband who's on a K-1 visa. We decided to go the ITIN route after consulting with a tax professional. One thing I'd add to all the great advice here is to double-check the mailing address when you send in your W-7 and tax return. The IRS has specific addresses for ITIN applications that are different from regular tax return processing centers, and using the wrong address can add weeks to your processing time. Also, keep copies of EVERYTHING you send - not just photocopies, but actually scan or photograph every page before mailing. The IRS has been known to lose documentation occasionally, and having digital copies makes it much easier to resend if needed. We're about 4 weeks into the process now and haven't heard anything yet, but based on what others are saying, we're prepared to wait the full 6-8 weeks. The peace of mind of filing jointly and getting the better tax treatment is worth the wait for us, especially since we're expecting a decent refund too.