Married Filing Jointly is the simple answer as long as you lived together.
"What I hear you asking is how do you report expenses you paid when your wife had no earnings.
You will still enter the expenses and end up with a business loss.
As a Real Estate Agent, your wife is considered Self-Employed. You will need to use TurboTax Self-Employed Online Software, or the TurboTax Home and Business Desktop CD to file. Within the software, you will report the expenses relating to this business. It does not matter that the expenses were paid with your earnings. It also does not matter that she did not earn anything as a Real Estate Agent. They are still business expenses you paid and they will generate a loss which will decrease your taxable income.
It is not uncommon to show a business loss, especially during a “Start-up” period. The IRS does “frown upon” a continuous loss spanning over several years, so in order to report the loss, you and/or your wife must be in the real estate profession with the intent to make a profit (someday).
If this will be the first tax year filing as self-employed, please follow the interview questions to set up the business. She will be considered a “Sole-Proprietor “and the tax ID will be her social security number. (unless she set herself up as another entity, but that is uncommon) Be sure to keep good records with your tax files. Continue through the income interview to the section where you will report the business expenses. If you get lost, type schedule c into the search box and click the jump to Schedule C.. Going forward, since she is not a W2 employee and there is no employer withholding taxes for her, you may need to make estimated tax payments for her income or increase the withholding on your paychecks. Her Broker or real estate association should have information about that for you.
Below are 2 links with more information about entering business expenses, one for TurboTax Online and one for TurboTax Desktop.
Thank you so much for your thorough answer. I have a few follow up questions. I am in the same situation. If I make $50,000 a year as a w2 employee and spouse who is a new realtor and has zero income in the first year (market is tough and hasn't been able to sell a home) and let's say she incurs $20,000 in expenses such as home office, business new car purchase, membership/professional fees you are saying our joint taxable income for the year is $30,000?
Also spouse has to use the self employed Turbotax? I have used the Turbotax premium for many years now and there is a section for "self employed" but when I ran this scenario on my tax return the Turbotax software did not seem to deduct her write off expenses from our total joint income.
For 2023 Turbo Tax changed from having Premier version and a self employed version and combined them into Premium (different name).
Did you get a Schedule C for her? Is there a loss showing on schedule C which goes to 1040 schedule 1 line 3 which goes to 1040 line 8.
If you are not showing a loss on Schedule C.
Some expenses, such as home office or section 179 depreciation can only be used to reduce your schedule C taxable income to zero, and not to create a loss. Excess deductions for these carry over to the next year. And you have to answer yes to both questions about exclusive and regular use, not just one. The area of your home office must be used regularly and exclusively for business to deduct it.
Or you checked the box on 32b saying Some Investment is Not at Risk.
If you have money not at risk you can not take a loss on schedule C. If you don't know what it means then probably All your Investment is at Risk (check Box 32a). It means you are using your own money for the business. People usually check the wrong box.
I am practicing for next year's tax return and was "amending" my tax return to practice to see if I could do my own tax return or if I needed to hire a CPA/professional. My understanding is a realtor is self employed which means they get a 1099-NEC and I didn't think they received a schedule C. When I'm practicing on TurboTax I notice that realtor's expenses/losses do not reduce our joint taxable income (mainly my W2 wage)
Right she doesn't get a Schedule C. She gets a 1099NEC or nothing. She FILLS OUT Schedule C. To report her self employment 1099NEC income.
Here is a blank Schedule C
http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
Here are the IRS instructions for Schedule C,
http://www.irs.gov/pub/irs-pdf/i1040sc.pdf
I hope you are not testing in your real 2023 return or you will mess it up. It only saves the last thing you enter and you will overwrite and lose your 2023 real return.
thank you and no worries. another side question...if i made an income from W2 and spouse made $0 as a realtor, and when I am trying to take home office deduction how come TurboTax gives me an error saying "Not eligible in 2023
A W-2 wage employee cannot deduct any employee business expenses on a federal tax return due the tax code changes in effect for tax years 2018 thru 2025. Since your spouse does not have any net income from their self-employment the home office deduction is not allowed.
It's not going specifically against your W2 wages. It is just reducing the total income on your return. Even if you didn't have any W2s you could take the loss.
As I said above....
If you are not showing a loss on Schedule C.
Some expenses, such as home office or section 179 depreciation can only be used to reduce your schedule C taxable income to zero, and not to create a loss. Excess deductions for these carry over to the next year. And you have to answer yes to both questions about exclusive and regular use, not just one. The area of your home office must be used regularly and exclusively for business to deduct it.
See Schedule C instructions http://www.irs.gov/pub/irs-pdf/i1040sc.pdf
Here is some IRS reading material……
IRS information on Self Employment
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center
Pulication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf
Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf
What Self Employed expenses can I deduct?
https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct
@dyzusc --
A few tips:
You must claim your spouse's business expenses on Schedule C of your tax return.
Since this will be her first Schedule C and she is reporting zero income, if your return is audited the IRS will likely want proof that your spouse actually has a legitimate business. Does she have a real estate license? Is she affiliated with a local real estate office? Did she actually use her car for business? (Commuting from home to office doesn't count.) Were real estate ads placed with her name? As you can see it's important that she keeps good records.
You can't just deduct the purchase price of a business vehicle. You must depreciate the cost. I suggest you review this TurboTax help article with regard to deducting business vehicle expenses:
https://turbotax.intuit.com/tax-tips/small-business-taxes/business-use-of-vehicles/L6hi0zzzh
Note that if the vehicle is used for both personal and business purposes, then you must pro-rate the expenses.