EITC with Self Employment income

[jpdx]

I am exploring qualifying for the EIC for the first time. My spouse and I have earned income from self-employment on a partnership K-1. I'd like to confirm that Sec 179 deductions will reduce our net SE income for EIC purposes.

Example: If a business otherwise has 50k of net income and purchases a 10k asset, this will reduce net SE income to 40k, thus increasing the amount of EIC, correct?

[MDM]

Doing a 2022 tax estimate with some software may be the best way for you to check this.

[LightStache]

I am exploring qualifying for the EIC for the first time. My spouse and I have earned income from self-employment on a partnership K-1. I'd like to confirm that Sec 179 deductions will reduce our net SE income for EIC purposes.

Example: If a business otherwise has 50k of net income and purchases a 10k asset, this will reduce net SE income to 40k, thus increasing the amount of EIC, correct?

...if the "asset" can be fully depreciated in the first year.

Just curious though, how do you manage to pay for your life and keep income within EITC limits?

[jpdx]

Doing a 2022 tax estimate with some software may be the best way for you to check this.

Good idea. This is always a helpful exercise. I ran it through last year's software and confirmed that Sec 179 deductions will indeed reduce earned income for EIC purposes.

...if the "asset" can be fully depreciated in the first year.

Just curious though, how do you manage to pay for your life and keep income within EITC limits?

Yep. I was specifically curious about Sec 179 deductions, which allow you to expense an asset purchase in the first year.

As to paying for life, I have a paid-off house and follow the tenants of this blog, so I can live comfortably within EIC limits. :)

[LightStache]

I'm not an accountant, but depreciation should reduce your income from the partnership. That's why we have that TCJA Sec. 179 deal, to encourage owners to buy dumb shit capital assets in exchange for tax savings. ;)

[MustacheAndaHalf]

I'm not an accountant, but depreciation should reduce your income from the partnership. That's why we have that TCJA Sec. 179 deal, to encourage owners to buy dumb shit capital assets in exchange for tax savings. ;)

In case you need a new term... how about "crapital assets" ?

[Ives]

I'd like to hear about this earned income credit and what it does! I'm paying off my house at it sounds like there are tax things I need to know about when I need to make less money after it's paid off next year and I guess if I stay under a certain amount I get something back? I was thinking of staying at about 48,000 a year after the house is paid off but maybe I should bump that a little lower to 40?

[sonofsven]

I'd like to hear about this earned income credit and what it does! I'm paying off my house at it sounds like there are tax things I need to know about when I need to make less money after it's paid off next year and I guess if I stay under a certain amount I get something back? I was thinking of staying at about 48,000 a year after the house is paid off but maybe I should bump that a little lower to 40?

If you're filing single with no kids you'll need to be down near $21k agi. Filing jointly with no kids it's near $28k.

[LightStache]

I'd like to hear about this earned income credit and what it does! I'm paying off my house at it sounds like there are tax things I need to know about when I need to make less money after it's paid off next year and I guess if I stay under a certain amount I get something back? I was thinking of staying at about 48,000 a year after the house is paid off but maybe I should bump that a little lower to 40?

If you're filing single with no kids you'll need to be down near $21k agi. Filing jointly with no kids it's near $28k.

And that's when it's completely phased out. To get the max $560 credit in 2022, you need to be lower than $16,480 single and $22,610 joint with no kids.

That's an income level I could never reach, which is why I asked up-thread how OP manages to live on it.

I'm not an accountant, but depreciation should reduce your income from the partnership. That's why we have that TCJA Sec. 179 deal, to encourage owners to buy dumb shit capital assets in exchange for tax savings. ;)

In case you need a new term... how about "crapital assets" ?

Haha yes I'll keep it in my linguistic quiver!

[sonofsven]

I'd like to hear about this earned income credit and what it does! I'm paying off my house at it sounds like there are tax things I need to know about when I need to make less money after it's paid off next year and I guess if I stay under a certain amount I get something back? I was thinking of staying at about 48,000 a year after the house is paid off but maybe I should bump that a little lower to 40?

If you're filing single with no kids you'll need to be down near $21k agi. Filing jointly with no kids it's near $28k.

And that's when it's completely phased out. To get the max $560 credit in 2022, you need to be lower than $16,480 single and $22,610 joint with no kids.

That's an income level I could never reach, which is why I asked up-thread how OP manages to live on it.

I'm not an accountant, but depreciation should reduce your income from the partnership. That's why we have that TCJA Sec. 179 deal, to encourage owners to buy dumb shit capital assets in exchange for tax savings. ;)

In case you need a new term... how about "crapital assets" ?

Haha yes I'll keep it in my linguistic quiver!

I've never been able to get the EIC, either. Maybe without a mortgage payment, but I love my 30 year fixed :)