1099 Instacart + First Time Homeowners

[jesszopp28]

My husband and I have always filed Married filing Jointly. I worked Instacart as a shopper for a few months and received a 1099 from them. What happens if this isn't included in our taxes? It is drastically affecting our return. Additionally, we purchased a home in December 2022. Our first mortgage payment was in February 2023 and we paid property taxes, HOI and PMI throughout all of 2023. We thought this would provide us some kind of tax break but again, not seeing that in our return. Is it because we are going with the Standard Deduction and it is very high now or is there another reason? 

[Vanessa A]

I worked Instacart as a shopper for a few months and received a 1099 from them. What happens if this isn't included in our taxes? If you intentionally do not include a form on your return, you are basically committing tax fraud.  You would be understating your income and your tax liability would also be understated.  Plus, your return will likely be delayed in being processed as the IRS does have a copy of your 1099, so they will send you a letter saying they are making adjustments to your return.  If for some reason they did not catch it prior to processing your return, and you received a refund when you should have had a tax due, you would have to pay back the refund and the actual amount you owed, plus any penalties and interest that accrued from the time it was due until they found the mistake. 

One of the reasons it is drastically affecting your return is because it is self-employment income which requires you to pay SE taxes which is 15.3% of your net earnings in addition to your regular taxes.  It is a good idea to make  quarterly estimated payments to cover your SE taxes of 15.3% and avoid penalties.

Additionally, we purchased a home in December 2022. Our first mortgage payment was in February 2023 and we paid property taxes, HOI and PMI throughout all of 2023. We thought this would provide us some kind of tax break but again, not seeing that in our return. Is it because we are going with the Standard Deduction and it is very high now or is there another reason? Yes, it is because you are taking the standard deduction.  If you are married filing a joint return, your standard deduction is $27,700.  In order to benefit from your home purchase you would need to have total itemized deductions greater than that. 

Standard versus Itemized Deduction

[xmasbaby0]

You are required to include the self-employment income from Instacart--excluding it is not an option.  You will owe self-employment tax for Social Security and Medicare, and ordinary income tax.

As for home ownership----buying/owning a home does not guarantee tax breaks or a bigger refund.  The homeownership deductions of mortgage interest, property tax and loan origination points have no effect unless all of your itemized deductions exceed your standard deduction.

You have self-employment income for which you will pay self-employment tax for Social Security and Medicare.   You will need to use online Premium software or any version of the CD/download so that you can prepare a Schedule C for your business expenses.

https://ttlc.intuit.com/questions/2926899-how-does-my-side-job-affect-my-taxes

https://ttlc.intuit.com/turbotax-support/en-us/help-article/form-1099-nec/1099-nec/L5qTsBiSe_US_en_U...

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

https://ttlc.intuit.com/questions/2902389-why-am-i-paying-self-employment-tax

https://ttlc.intuit.com/questions/1901340-where-do-i-enter-schedule-c

https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct

https://blog.turbotax.intuit.com/self-employed/self-employed-tax-deductions-

calculator-2021-2022-50907/

Go to Federal> Deductions and Credits> Your Home to enter mortgage interest, property taxes, and loan origination fees (“points”) that you paid in 2023.  You should have a 1098 from your mortgage lender that shows this information.  Lenders send these in January/early February.

It is very hard for a lot of people to use itemized deductions now that the standard deduction is so much higher.  Your home ownership may not have any effect on your tax due or refund, especially if you purchased the house late in the year.  

Standard Deduction

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach.  The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes. 

2023 STANDARD DEDUCTION AMOUNTS

SINGLE $13,850  (65 or older/legally blind + $1850)

MARRIED FILING SEPARATELY $13,850  (65 or older/legally blind + $1500)

MARRIED FILING JOINTLY $27,700  (65+/legally blind) )  + $1500 per spouse

HEAD OF HOUSEHOLD  $20,800 (65 or older/blind)  + $1850)

There is not a first time home buyers credit on a Federal return. That ended in 2010. If your state has such as credit, you will be able to enter it when you prepare your state return.

Buying a home is not a guarantee of a big refund.  Your deductions for homeownership combined with your other deductions (if any) must exceed your standard deduction to change your tax due or refund. If you purchased your home late in the year, you do not even have a full year of home 

ownership deductions.

Your closing costs on your new home are not deductible except for prepaid interest, prepaid property tax or loan origination fees.  There are no deductions for appraisal, inspections, title searches, settlement fees. etc.

Your down payment is not deductible.

Your homeowners insurance for fire, hazard, flood, etc. is not deductible for your own home.

Home improvements, repairs, maintenance, etc. for your own home are not deductible.  

Homeowners Association  (HOA) fees for your own home are not deductible.