Your Life

Your Life

Major life milestones often have a major tax impact. Changes in your marital status, having a baby or adopting a child can have significant impact on your taxes. This is the place to ask questions about dependents, real estate, and other various scenarios that play a significant role in what taxes you pay.

Reply
Tax Pro
Posts: 5,806
Registered: ‎02-23-2016

Re: Starting an LLC filing as a Sole Proprietorship

Hi BrewerGray2012,

 

 

Only one thing will affect you.  Dependents do not get a personal exemption, so your filing threshold is $6,300.  Anything you earn over that amount will be taxable for the federal income tax.  If you are age 18 or under then your income won't change this.  However, if (1) you're either over 18 years of age & you're not a full-time student or you're 24 years of age or older, and (2) you earn more than $4,050 then your dad can't claim you and you get a personal exemption which means your filing threshold would be $10,400 and you can earn that much more before owing federal income tax.  You'll owe the self-employment tax on everything above the $400 threshold for that tax regardless though.

 

Also, if you're claimed as a dependent you cannot take most tax deductions & you cannot take any credits on your Form 1040, but you can still deduct expenses from your business on Schedule C and carry any loss that you have to the 1040 and that still works the same way as far as reducing your other income.

 

Also, it's important to note that if your dad can and/or does claim you then, for accuracy in calculating the return, you have to check off the appropriate box on your tax return indicating that you are the dependent of another taxpayer.