Just a tip from another woodworker - keep a separate credit card for business purchases. Makes tracking expenses sooo much easier. I made the mistake of mixing personal and business purchases my first year and spent days sorting receipts at tax time! Also, take photos of your workspace and tools for documentation. If you're ever audited, having visual proof of your business assets is super helpful.

As someone who went through this exact transition last year, I can confirm that most of your woodworking expenses are indeed deductible! A few additional points that helped me: For your existing tools, get them appraised or research comparable sales prices to establish fair market value when you converted them to business use. I used eBay sold listings for my older tools. One thing I wish I'd known earlier - if you're buying materials in bulk (like when lumber yards have sales), you can only deduct the cost of materials for items you actually sell in that tax year. Any remaining inventory carries over to the next year. Also consider joining a local woodworking guild or subscribing to trade magazines - these memberships and educational expenses are deductible too as they help improve your business skills. The IRS has a great publication (Pub 535 - Business Expenses) that specifically covers what you can deduct. It's dry reading but worth skimming through for a hobby-turned-business situation like yours. Keep detailed records of everything, especially the business use percentage of mixed-use items. I use a simple spreadsheet to track which projects are personal vs. business throughout the year.

Great question about HELOC business use! I went through this exact scenario when I started my marketing consultancy two years ago. The IRS is very clear that business interest is deductible regardless of what secures the loan - it's all about the use of funds, not the collateral. Here's what worked for me: I opened a dedicated business checking account and ONLY deposited HELOC draws into that account. Every business expense came out of that account, creating a perfect paper trail. I also kept a simple spreadsheet logging each HELOC draw with the date, amount, and intended business purpose. One tip that saved me headaches: when you make your monthly HELOC payment, split it between principal (not deductible) and interest (deductible as business expense). Your lender's monthly statement will show this breakdown. I track this in QuickBooks under a "Business Interest Expense" account. The key is treating it like any other business loan from day one. Keep immaculate records and you'll have no issues deducting 100% of the interest as a legitimate business expense on your tax return.

I've been through this exact situation with my tech startup last year, and you're absolutely on the right track thinking about documentation upfront. The IRS treats business interest deductibility based on the "tracing rules" - essentially, what matters is where the borrowed money actually goes, not what secures the loan. Here's my practical setup that's worked flawlessly: I created a separate business checking account exclusively for HELOC funds. Every draw goes there first, then gets used only for documented business expenses. I also set up a simple tracking system in Excel with columns for: Draw Date, Amount, Business Purpose, and Supporting Documentation (receipt numbers, invoices, etc.). One crucial point many people miss: make sure your HELOC agreement doesn't restrict business use. Some lenders have clauses limiting how you can use the funds, so review that paperwork carefully. Also, consider timing your draws strategically - only take what you need when you need it, rather than drawing a large lump sum, since you'll pay interest on the entire outstanding balance. The tax law changes you mentioned only affected personal use of HELOC interest (like home improvements or personal expenses). Business use remains fully deductible as long as you can demonstrate the clear business purpose and maintain proper records.

I went through this exact same situation two years ago with my brother-in-law. We flipped one house together and I was torn between Schedule C and Schedule D treatment. What ultimately helped me decide was documenting the actual hours I spent on the project. I kept a simple log showing I worked about 25-30 hours per week for 4 months on renovation, coordinating with contractors, picking materials, etc. That level of time investment clearly pushed it into "business activity" territory. The IRS has a general rule that if you're materially participating in the activity (more than 500 hours annually OR substantially all the participation in the activity), it's likely a business rather than an investment. Your 5 months of regular weekend and evening work probably puts you well over that threshold. One thing to consider: even though Schedule C means self-employment tax, you can also deduct business expenses that wouldn't be allowed on Schedule D. In my case, the additional deductions (including mileage, tools, some meals with contractors, etc.) more than made up for the SE tax difference. My advice: document your actual involvement and hours if you can reconstruct them. That will give you the strongest position if you ever need to defend the Schedule C treatment.

Based on all the great advice here, I wanted to share my perspective as someone who went through an IRS audit related to this exact issue. My husband and I flipped a house three years ago (our first and only flip), and we initially filed it as a capital gain on Schedule D because we thought "one-time" meant it couldn't be a business. The IRS audited us and actually argued that we SHOULD have used Schedule C based on our level of involvement. We had renovated the property ourselves over 6 months, managed contractors, and were actively involved in all decisions. The auditor explained that the "business vs. investment" determination isn't about frequency - it's about the nature and extent of your activities. We ended up having to amend our return to Schedule C, which actually worked out better for us because we could deduct expenses we hadn't been able to claim before. The lesson learned: if you're hands-on with renovation work for months like you described, the IRS is likely to view it as business activity regardless of whether it's your first flip. Given your 5 months of active involvement and the fact that your dad's CPA is treating it as business income, I'd lean toward Schedule C. The consistency between partners and your material participation seem to support that classification. Just make sure you can document your business expenses properly!

I'm surprised nobody mentioned that you might be able to access your W-2 electronically before the paper copy arrives! Many employers use payroll systems like ADP, Workday, or Paychex that let you login and download your W-2 in January, sometimes weeks before the paper copy arrives in the mail.

One thing that might help clarify the confusion - think of the W-4 as your "instruction sheet" to your employer about how much tax to take out of each paycheck, and the W-2 as your "year-end report card" showing what actually happened with your earnings and tax withholdings. Since you started that second job late in 2024, you'll want to pay attention to whether enough taxes were withheld from both jobs combined. Sometimes when you have multiple jobs, you might end up owing money at tax time if not enough was withheld overall. When you fill out your tax return with both W-2s, the software will calculate if you owe more or if you're getting a refund. Also, for next year (2025), you might want to update your W-4 forms at both jobs using the IRS's online withholding calculator to make sure the right amount of tax is being taken out when you have multiple income sources.

I switched from a $700 tax preparer to TurboTax last year with a similar situation (self-employed spouse, W2 income for me, 2 kids, mortgage). TurboTax worked fine BUT it took me almost 6 hours to complete everything correctly!!! The software kept asking me the same questions in different ways and got confused about the home office deduction. Not sure my time is worth the $700 savings tbh. This year I'm trying FreeTaxUSA since people say it's more straightforward for self-employment income.

I'm in almost exactly your situation - two W-2s, spouse with home business, young kid, and recent homeowner. I was paying $950 to my CPA until this year when I decided to try the DIY route. What helped me make the decision was realizing that most of the "complexity" in our situation is really just volume, not actual difficulty. Multiple W-2s are straightforward, mortgage interest is automatic, and the child tax credit is built into any decent software. The trickiest part is the self-employment/home office stuff, but if your wife keeps good records, that's manageable too. I ended up using TaxAct (similar to TurboTax but cheaper) and it walked me through everything step by step. Took about 3 hours total and I actually caught a deduction my CPA had been missing for years! Saved over $700 and got a bigger refund. That said, $1,150 does seem really high for your situation. Even if you stick with a professional, I'd shop around - you should be able to find someone competent for $400-600 max. Don't let them scare you into thinking your taxes are more complicated than they actually are.