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Tutoring cash, exam fees, and a car loan interest deduction nobody saw coming.
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Good morning! Every Saturday, we open the mailbag, pour some strong coffee, and tackle the tax questions keeping America awake at 2 a.m.
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Here are this week’s topics:
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📱 Venmo isn’t sending a form. The IRS heard that excuse already and wasn’t moved.
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🎓 You paid to become a CPA. The IRS says that guy owes his own tuition.
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🚗 Paying off a car loan early sounds responsible. Responsibility, it turns out, has a price.
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Money Moves
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📱 Venmo doesn’t file the paperwork. You still have to.
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I tutor a few students after school, paid mostly through Venmo. Do I need to report that, or is it too small to matter?
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Report it. The IRS does not have a “too small to matter” carve-out, and if it did, tutoring money would not be the hill it chose to die on.
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Here’s the mix-up: people have heard payment apps now send a Form 1099-K for business income and translated that into “no form, no problem.” Those are two different obligations. The 1099-K threshold only controls when Venmo has to tell the IRS what it processed — currently $20,000 and 200+ transactions, after the One Big Beautiful Bill Act pulled it back from a planned drop to $600. A few tutoring payments a year won’t come close.
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Your obligation has no threshold at all. Income is taxable the moment you receive it, in cash, by check, or through an app, regardless of whether a form ever shows up. The 1099-K was never what made the money taxable — it just makes it easier for the IRS to check. Its absence isn’t a legal defense, whatever that TikTok “expert” says.
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What you owe depends on what you clear. Net $400 or more for the year and you owe self-employment tax on top of income tax, reported on Schedule C. Under $400 net, skip the SE tax, but still report the income. (We went deep on the SE tax math last month, if you want the full breakdown.)
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Track what you’re paid, deduct legitimate expenses (materials, mileage), and report the net.
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THE TAXSTACHE TOOLKIT
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Cash, Venmo, a check from a neighbor — the IRS doesn’t care how it landed in your account. Plug in your numbers and see exactly what you owe before they tell you.
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Business & Gigs
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🎓 The CPA exam qualifies you for a new job. That’s why it’s not deductible.
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I spent about $1,200 on CPA exam prep and fees. Is any of that deductible?
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No, and people have tried arguing otherwise in actual court, which tells you how badly they wanted this deduction.
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The IRS draws a hard line between education that maintains or improves skills in your current trade, and education that qualifies you for a new one. The first can be deductible. The second never is, no matter how directly it relates to the job you already have.
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CPA exam prep falls in the second bucket. The IRS said so directly in Revenue Ruling 69-292, and courts have backed it up: a licensed CPA can legally do things a non-CPA accountant can’t, which makes “CPA” a different trade or business, even after years at the same desk. The test is what the credential legally unlocks, not how you feel about your career trajectory.
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This holds for W-2 employees and the self-employed alike. For employees it’s doubly moot — the unreimbursed employee expense deduction that might have covered this was suspended by the Tax Cuts and Jobs Act, and the OBBBA made that suspension permanent rather than letting it expire. For the self-employed, exam costs still get sorted into “new profession” and knocked off Schedule C.
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One bright spot: employer reimbursement through a formal educational assistance program can come to you tax-free, up to $5,250 a year, under Section 127. That’s your employer working around the rule — not you finding a loophole in it.
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THE TAXSTACHE TOOLKIT
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The IRS has one test for whether your education is deductible, and it has nothing to do with how much you spent.
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Every Thursday, we go to work.
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The TaxStache Business Edition breaks down the tax and finance topics that actually matter to business owners, from quick intros to in-depth dives. Plus book, podcast, and video recs to keep you sharp, and a weekly download you can put to use right away.
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If you own a business (or you’re building one), this one’s for you.
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Filing Made Simple
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🚗 You might have missed a deduction. You also might not have had one.
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I paid off my car loan early this year — did I just miss out on some kind of interest deduction?
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Possibly, but not for the reason you’d assume — and the more interesting news is there’s now a deduction worth losing sleep over, which is new.
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Personal car loan interest has been off the table since 1986, when Reagan-era tax reform killed deductions for personal interest generally. But the One Big Beautiful Bill Act carved out a temporary exception (see our full breakdown of the car loan interest deduction, one of four new deductions the law created): for 2025 through 2028, up to $10,000 a year in “qualified passenger vehicle loan interest” is deductible, no itemizing required. It comes with a bouncer’s list of conditions, though:
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The loan had to originate after Dec. 31, 2024.
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The vehicle has to be new, not “new to you.”
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Final assembly has to be in the U.S.
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Personal use, under 14,000 pounds, loan secured by a lien on the car.
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If your loan predates 2025, or the car wasn’t new, there was nothing to miss — the interest was never deductible in the first place. If it does qualify, paying it off early doesn’t erase interest you already paid and already deducted; it just leaves less to deduct going forward. That’s a smaller future write-off in exchange for not owing the bank anymore, generally a good trade.
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There’s also an income cap to know about: the deduction phases out above $100,000 MAGI single ($200,000 joint), gone entirely at $150,000 ($250,000 joint). Worth checking before you mentally spend that $10,000.
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THE TAXSTACHE TOOLKIT
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A new deduction exists for car loan interest — but it’s picky about the vehicle, the loan date, and your income. Run yours through the checklist before you assume either way.
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