• if you cannot be claimed as a dependent by anyone else
• if you live with the taxpayer (or in a way the IRS would recognize),
• if your gross income is more than $5,000
• if your parent is spending substantial income on your health, housing, etc.

A common situation looks like this: someone is in their mid-20s, living at home, working part-time, and earning relatively little income. Parents often wonder whether they can still claim that child on their tax return.

Qualifying Children vs Qualifying Relatives

The IRS recognizes two broad categories of dependents: “qualifying children” and “qualifying relatives.” Once someone passes a certain age threshold, they usually fall under the qualifying relative rules instead.

For most adult children over age 24, the qualifying relative test is the one that matters.

To qualify under this category, several conditions must be met:

• First, the person cannot be claimed as a qualifying child by anyone else.

• Second, they must either live with the taxpayer for the entire year or be closely related in a way the IRS recognizes. A child living with their parents typically satisfies this requirement easily.

• Third, is the income test. For someone to be claimed as a qualifying relative, their gross income must fall below a certain annual threshold set by the IRS. In recent years, that limit has been over $5,000. This number changes periodically with inflation, but it is much lower than many people expect.

This means that earning $5,001 per year would exceed the income limit for dependency under the qualifying relative rules. Even if the person lives at home and relies heavily on their parents for support, that level of income would typically prevent the parents from claiming them as a dependent.

The Support Test

Another important factor is the support test. The parent claiming the dependent must provide more than half of the person’s total support for the year. Support includes housing, food, medical expenses, education costs, clothing, transportation, and other living expenses. When an adult child lives at home, housing alone often represents a significant portion of support, but the income limit still has to be met.

Because of this income threshold, many adult children who live with their parents cannot be claimed as dependents even if they are financially struggling. The rules are fairly strict on this point.

Education Plays A Role in Dependency Eligibility

There are also situations where the “qualifying child” rules might still apply for someone over 18. If the individual is a full-time student and under age 24 at the end of the tax year, parents may still be able to claim them as a dependent provided the student lived with them for more than half the year and the parents provided the majority of their support. Once someone turns 24, this category generally no longer applies.

Parents sometimes assume that if their child lives at home rent-free, that alone allows them to claim them as a dependent. While housing support does matter, it does not override the income test for qualifying relatives. Both requirements must be satisfied.

What are the Tax Implications

There are also tax credits tied to dependents, which is often why the question comes up in the first place. If an adult child qualifies as a dependent but does not meet the “qualifying child” criteria, parents may still be eligible for the Other Dependent Credit. It’s smaller than the Child Tax Credit but can still provide some tax benefit.

For the adult child, being claimed as a dependent can also affect their own tax return. They can still file a tax return if they have income, but they must indicate that someone else can claim them as a dependent. That status changes certain deductions and credits they may qualify for.

Living at Home does not Immediately Qualify Someone as a Dependent

The bottom line is that living at home does not automatically make someone a dependent. The IRS looks primarily at income levels and who is providing the majority of financial support. In the example of a 26-year-old living at home and earning around $15,000 per year, the income threshold alone would usually prevent the parents from claiming them.

Understanding these rules can help families avoid mistakes on their tax returns and prevent issues if the IRS later questions the dependency claim. When in doubt, reviewing the specific income, support, and living arrangements for the year can clarify whether the dependency rules are actually met.

The post Can Your Parents Claim You as a Dependent? appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

But what happens when your CPA claims deductions you never made — or worse, outright falsifies information on your tax return? Unfortunately, this does happen, and it can put you in a difficult and risky situation.

Let’s walk through what this means, how to protect yourself, and what steps you can take if you find yourself in this situation.

Red Flags in Tax Preparation

Here are some signs that a tax preparer may be engaging in questionable or fraudulent practices:

• Unexplained deductions: Reporting charitable contributions, mortgage interest, or business expenses you never claimed.
• Promising unusually large refunds: If it seems too good to be true, it probably is.
• Filing without review: You should always see your completed Form 1040 before it’s submitted to the IRS.
• Pressure to sign without explanation: Form 8879 (authorizing e-filing) must be signed knowingly and after reviewing your return.

In short: a reputable CPA or tax preparer will walk you through your return, explain line items, and make sure you understand and approve everything before submission.

Why This Matters: The Risks of False Deductions

Even if you didn’t know about the false deductions, you are legally responsible for the accuracy of your tax return once it’s signed and submitted. This means the risks include:

• IRS audits that may uncover discrepancies.
• Penalties and interest on underpaid taxes.
• Potential fraud allegations if the deductions appear intentional.
• Immigration concerns if you’re a foreign citizen working in the U.S.—tax fraud can have consequences beyond finances.

The Right Steps to Take

If you discover your CPA claimed false deductions:

1. Stop working with that CPA
   Never return to a tax preparer who falsifies information, even if they promise higher refunds.
2. Amend your return
   File an amended return (Form 1040-X) with accurate information. This will correct the record and help you avoid penalties down the line.
3. Repay any excess refund
   If you received a refund you weren’t entitled to, the IRS will expect repayment once your return is corrected. Paying it back proactively helps protect you.
4. Keep records
   Document your communications with the CPA, your original return, and the amended return. This can protect you if questions arise later.
5. Consider reporting the CPA
   You can report unethical or fraudulent preparers to the IRS using Form 14157 (Complaint: Tax Return Preparer). If the CPA is licensed, you may also file a complaint with their state licensing board.
6. Work with a trusted professional
   Find a CPA or tax preparer who explains your return, encourages transparency, and aligns with professional ethics.

Should You Report the CPA?

Reporting a fraudulent CPA helps protect other taxpayers from falling into the same trap. However, it’s a personal decision. There’s no direct financial benefit to you, but it does uphold accountability in the profession.

Key Takeaways

• Always review your return before it’s filed.
• Never sign blindly: understand what Form 8879 or any authorization form means.
• You’re ultimately responsible for the information on your tax return.
• Correct mistakes quickly through an amended return to reduce risks and penalties

Tax season is stressful enough without worrying about unethical practices. If your CPA or preparer ever pressures you into signing or can’t clearly explain your return, take it as a red flag. At Huddleston Tax CPAs, we believe in transparency, accuracy, and compliance first because peace of mind comes from knowing your taxes are done right.

Need help amending a return or reviewing a questionable filing? Contact us at (425) 483-6600 to speak with a CPA who puts ethics first.

The post If Your CPA Claims False Deductions & What To Do About It appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

But therapy, while incredibly valuable for your mental health and well-being, isn’t cheap. If you’re juggling tight margins or self-funded health care, you might be wondering: Can I deduct therapy costs on my taxes?

The short answer: Sometimes — if the expense meets certain criteria.

When Therapy Qualifies as a Business Expense

To deduct therapy as a business expense, the sessions must be directly related to your work. The IRS allows deductions for “ordinary and necessary” business expenses — and yes, that can include mental health support if it’s essential to running your business.

Let’s say you’re a business owner or independent contractor dealing with chronic stress, anxiety, or burnout that directly impacts your ability to lead, meet deadlines, or manage teams. If therapy helps you maintain the focus and resilience required to operate your business, then some or all of that cost may be deductible as a business expense.

It’s not just for mental health professionals, either. While therapists can obviously write off therapy to help them stay present and empathetic with clients, business owners in high-stress fields — tech, legal, finance, real estate, creative industries — may also qualify, so long as they can connect the expense to their professional performance.

What’s NOT Deductible?

Therapy solely for personal reasons (e.g., grief counseling, relationship issues, personal growth) typically doesn’t qualify as a business expense. Those costs are considered personal and fall under medical deductions, not business write-offs. And even then, medical deductions only kick in if your total unreimbursed medical expenses exceed 7.5% of your adjusted gross income — and you choose to itemize your deductions.

Here’s a quick breakdown:

• ✅ Therapy to manage job-related stress, burnout, anxiety, or conditions impacting your work: Potentially deductible
• ❌ Therapy for general wellness, family dynamics, or personal issues unrelated to your business: Not deductible as a business expense

Examples of Therapy-Related Expenses You Might Be Able to Deduct

If you qualify, here are therapy-related costs that could be partially or fully deductible as business expenses:

• Therapy sessions with a licensed provider (in-person or virtual)
• Travel costs to attend therapy (mileage, airfare, hotel) if business-related
• Mental health books, workbooks, or courses used to improve workplace performance
• Subscriptions to therapy-related apps or industry publications that contribute to mental resilience or leadership skills
• Memberships in professional wellness or coaching organizations that support your mental health

Don’t Forget: Documentation Is Key

If you’re planning to deduct therapy or mental health support as a business expense, make sure to:

• Keep detailed records and receipts
• Maintain a clear connection between the therapy and its business relevance
• Work with a CPA to ensure the deduction is correctly categorized and defensible

The IRS doesn’t draw a firm line here — it depends heavily on context and intent — which is why having a tax professional guide you through the process can make all the difference.

What About Health Insurance or Support Groups?

Some additional mental health-related expenses may also be deductible, though not necessarily as business expenses. For example:

• Health insurance premiums that include mental health care coverage (often deducted as self-employed health insurance)
• Medications for diagnosed mental health conditions
• Participation in support groups or coaching programs aimed at improving workplace performance

Final Thoughts

If therapy helps you be a better leader, communicator, or decision-maker in your business, it could be considered a valid business expense — but only if there’s a clear connection between the treatment and your professional responsibilities.

As with all tax matters, gray areas exist, and claiming therapy as a deduction is one of them. If you’re unsure, talk to a CPA (we happen to know a few).

Image by Caity from Pixabay

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The WeWork Scenario: Office Space Deductions

If you’re a tech startup working out of a WeWork space in downtown Seattle, good news: your rent is most likely fully deductible. The IRS generally allows businesses to deduct the entire cost of commercial office space used exclusively for business purposes. This means if you’re paying $3,000 a month for a dedicated workspace at WeWork, that’s typically 100% deductible as a business expense.

Pro tip for PNW startups: Keep detailed records of your lease agreements and payments. In an audit-happy environment, documentation is your best friend.

The Home Office Dilemma: When Your Apartment Becomes Your Workspace

Here’s where things get interesting. Many Seattle-ites, especially in the tech and creative sectors, work from home. If you’re renting a downtown Seattle apartment and using a portion of it exclusively for business, you might qualify for a home office deduction.

What Qualifies for a Home Office Deduction?

Not all home spaces are created equal in the eyes of the IRS. To deduct rent for a home office, you must meet two critical criteria:

1. Exclusive Use: The space must be used exclusively for business. That means your kitchen table doesn’t count if you also eat dinner there. A dedicated room or clearly defined workspace is necessary.
2. Principal Place of Business: The space must be your primary work location or where you regularly meet clients.

Calculating Your Deduction

Let’s say you’re in a 1,000 sq. ft. Seattle apartment, and your home office is a 200 sq. ft. room. You could potentially deduct 20% of your:

• Rent
• Utilities
• Home insurance
• Property taxes (if you own)
• Maintenance costs

Seattle-Specific Considerations

The startup ecosystem means many entrepreneurs blur the lines between personal and professional spaces. So be meticulous with your documentation:

• Maintain a floor plan showing your dedicated workspace
• Take photos of your home office setup
• Keep a log of business hours and activities in the space
• Consider getting a professional measurement of your workspace

Potential Red Flags to Avoid

The IRS will scrutinize home office deductions especially in a post-COVID world. Common mistakes include:

• Claiming more space than actually used
• Inconsistent reporting between personal and business tax returns
• Lack of clear business purpose for the space

Special Considerations for Entrepreneurs

Washington State’s tax environment is unique. While we don’t have a state income tax, federal rules still apply. Startups in Seattle, Bellevue, and across the Puget Sound region should be particularly careful about how they document and claim these deductions.

The Bottom Line

Rent deductibility isn’t a one-size-fits-all scenario. For tech startups, coworking spaces are usually straightforward. For home-based businesses, the devil is in the details.

Recommendation: Consult with a CPA who understands the nuanced tax landscape of your industry.

Disclaimer: Tax laws change frequently. This guidance is current as of 2024 and should not be considered definitive tax advice. Always consult with a qualified tax professional before making significant tax decisions.

Photo by Daniil Silantev on Unsplash

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To make sure you qualify, check with your tax preparer because there are specific rules about how many days per year an office must be used. For instance, a home office needs to be used exclusively by an individual who works in that space to meet client needs. People who can claim home office deduction taxes are:

1. Self-Employed Owners

This includes doctors, lawyers, accountants, real estate agents, and freelancers. There are many misconceptions about who qualifies for a home office deduction on their taxes, but all people who fall into this category can claim it. But they must prove they used the room or space exclusively to do their work.

Self-employed owners can claim a deduction for the money they spent on materials to furnish their home and additional expenses such as depreciation on furniture.

2. Owners of limited liability companies, partnerships, and S corporations

Almost everyone in an LLC, partnership or S corporation can claim a home office deduction on their taxes because it is optional to be physically present in the office to work from home. It has been clearly defined in the tax code that the home office must be used exclusively by the owner to conduct his business. People in C corporations can deduct a percentage of expenses they spend on their home office rather than a specific dollar amount.

3. People who work from home for their company

If you work for a company and do some of your work from home, you can also claim this deduction. You will need to prove that it is a principal place of business, which means that the space is for trade only and not a secondary residence. You cannot claim this tax deduction because you may have a secondary place. After all, the IRS will consider it as a personal home.

This explains who can claim a home office deduction on their taxes, it does not explain the amount of money you can and cannot claim as an expense for your home office tax deduction. If you are looking for a way to deduct costs you incur in your home or “office” space, we suggest contacting our CPA firm.

It is important to always check with your tax preparer before making any deductions or items you can consider for tax purposes that you cannot claim on your taxes.

Image by tookapic from Pixabay

The post Who Can Claim A Home Office Deduction For 2022 Taxes? appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

What is a tax deduction?

A tax deduction is a reduction in taxable income. In most cases, this occurs when a taxpayer claims a reduction in their annual income for out-of-pocket expenses. In the context of pet ownership, owners can recoup some of the costs of pet care through a deduction on their taxes. Tax deductions are different from tax credits, which are credits that directly reduce the amount of taxes owed by an individual.

Which pets qualify for tax deductions?

The IRS officially recognizes only service animals as pets qualified for a tax deduction. This means that any other type of pet will not automatically qualify for a tax deduction. If a pet owner wants to claim a tax deduction for their non-service animals, they must provide documentation for why this would be a valid deduction.

Pets as tax deductible

There are many categories of deductions that can be applied to pet care. These include veterinary care, food, supplies, boarding fees, training fees, and more. To be considered a valid deduction, these expenses must be reasonable. For example, pet owners who want to claim the cost of feeding their pet by weight will likely have to provide receipts to prove their authenticity. 

Remember that the total amount deducted for your pet cannot exceed a certain threshold. The Internal Revenue Service (IRS) allows taxpayers to deduct up to a certain percentage of their Adjusted Gross Income (AGI). The percentage is between 2% and 20%, depending on the type of pet.

IRS Tax Deductions for Pet Losses

If an animal is permanently disabled or dies due to a documented illness or accident, an owner may be entitled to a refund for their medical and other expenses. However, this only applies to a service animal, and the owner must have proof of the cause of death or disability.

Conclusion

Pets make great companions, but they can also be expensive. Luckily, many pet owners can recoup some of these costs through the tax code. In many cases, pet ownership can be a personal expense for which the owner may qualify for a tax deduction. Understanding the nuances and restrictions of this deduction can help pet owners save some money come tax season.

Photo by Matthew Henry on Unsplash

The post Pets as Tax Deductible: What You Need to Know  appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

Thinking about getting a tax deduction for the period you worked from home during the pandemic? Some managed to make a few more savings than usual — especially if they previously commuted to their office or ate out. On the other hand, some things became more expensive as many had to stock up on office supplies to turn their home office into a functioning office. Or they may have had to finally upgrade their internet connection to attend meetings and be as responsive as possible. To add insult to injury, being stuck at home means using more energy than usual. Water and power bills have risen considerably (collectively).

Considering these cost increases (and despite the relief checks), many have been wondering if there’s a home office deduction to claim for your 2021 tax return.

Are you eligible for home office deductions?

The home office deduction lets you write off office expenses incurred using your home as a place of business. However, there’s a few caveats:

1) All employees are not automatically eligible
Before 2018, it was possible to deduct 2% of your office or business expenses. However, you had to itemize the list to calculate the tax deductible amount. However, this policy was terminated in 2017 by the Tax Reform Law.

2) It applies if you’re a contractor or self-employed
If you’ve spent most of the pandemic running your own business, you’re in luck. Your needs are catered for in Schedule C (Form 1040). This section does not care if you were working from home or not. You can write off supplies, postage, tech gadgets, printers, and all the other essentials you need for your home office. 

There’s no better time to start your own business. Our CPAs can work with you to determine what classification is best for your business.

Photo by Roberto Nickson 

The post Can You Claim a Home Office Deduction If You Worked at Home During Covid? appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

Max out Your Contributions

With a traditional IRA, you can make as many tax-deductible contributions as you like within your limits. If you want to save money on taxes in the end, you should max out your ROTH IRA because it will be taxed when contributing yet when you withdraw you do not have any taxes.

Contribute for the Prior Year in the New Year

After you receive your taxes owed amount you may find it to be too expensive. Keep in mind that you can contribute to your IRA up until tax day for the prior year. We think that it is best to contribute to your future than to give your hard-earned money to Uncle Sam.

Save For Retirement Early

Once you have gotten everything out of the way for the current tax year, why not go ahead and start preparing for the New Year? You can set up automated contributions for retirement during the year.

1. Max out your 401 (k) account through that has employer matching
2. Try to reach your maximum limit on your ROTH IRA
3. Put more money into a 401 (k)

Closing Thoughts

When you automate your contribution payments in the beginning of the year you can make sure that you have tax breaks available at the end of the tax year. Huddleston Tax CPAs can help you use your IRA as a last minute tax deduction. Call us at (425) 483-6600 or visit our Bellevue CPA site.

The post Tips for Using Your IRA as a Last Minute Tax Deduction appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

State and Local Sales Tax
If you live in a state with no income tax, you should take advantage of deducting the state and local taxes instead. You just have to remember to keep your receipts for in the event that you are audited.

Bonus Depreciation
Small and medium sized businesses are able to write off 50% of the costs of assets that they purchased for business during 2014. This means that they can deduct up to $500,000 of qualifying assets instead of the projected $25,000. This can help business owners save a large amount of money. Therefore, you want to make sure you check to see if you are eligible for these deductions.

Visit our Shoreline CPA blog to read “4 Things a Sneaky Tax Preparer Will Not Tell You”

Health Insurance Premiums
If you are self-employed, you are able to deduct your health insurance premiums. For some the Affordable Care Act will be expensive but self-employed individuals will get a tax break since they have to pay for their health insurance premiums themselves.

Mortgage Points
Many taxpayers are aware of the mortgage interest deduction but they are unaware that they can deduct the costs of the points. The costs of the points still have to be spread over the mortgage life but this is a deduction that can help you save.

Conclusion
If you need help with your deductions or need help in other tax areas, look into hiring a professional tax firm to file for you. We suggest reaching out to our tax firm Huddleston Tax CPAs. We are a Seattle CPA firm that specializes in assisting small businesses and individuals. You can reach us at (425) 483-6600.

The post 4 Tax Deductions That Can Save You Big Bucks appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

Out of Pocket Charitable Deductions

Little donations add up. Make sure you keep your receipts each time you donate, so if you go over $250 in donations you can provide documented proof to the IRS. Additionally, if you volunteer for a charity and spent your money for them that is deductible too.

Student Loan Interest Paid by Parents

If you are a college student who cannot be claimed as a dependent by your parents, you can deduct the interest that they paid on your student loans. You can do this without messing them up because even though they are the ones who pay for your student loans, the IRS looks at it as though they gave the money directly to the child.

Job Hunting Costs

Most of the money that you spend searching for a new job can be deducted when tax time comes around. However, to be eligible for the deduction you have to make sure that you were searching for a position in the same line of work that you did previously.

Bottom Line

When tax season rolls around, slow down and take your time when filing your tax return to ensure that you do not overlook any tax credits.

Thanks for reading our Seattle CPA blog post! We update weekly!

If you’re looking for a CPA this upcoming tax season, call us at (425) 483-6600!

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