Nicole Espaillat: A money story of debt, yoga, and buying a house.

Nicole Espaillat

has an art history degree, 10 years of experience working in the art world, and is now a full time yoga instructor who is going back to school for accounting. She is learning to do taxes at Sunlight Tax. Nicole generously agreed to share her personal money story: She went from $100,000 in debt and living on food stamps to owning her own home and getting her money under control. Now she is learning accounting, so that she can teach money skills to people like her.

Hannah: So Nicole, tell us the basics.

My pronouns are she/her, I’m based out of Baltimore, MD for the last four years.  I am working on finishing my degree in accounting--that’s my quarantine “baking bread” project. It’s a long haul project, but I went back to school officially during quarantine. I am an area manager for Core Power Yoga - that is my nine to five. I also teach yoga at a couple mom and pop local studios. I also do bookkeeping for an outspoken artist collective in Baltimore: NomuNomu.

I have been doing art since I was eighteen--my first job was in an art museum. It was the only thing I knew--the dysfunctional world of art. I moved to Baltimore after the Trump election. I was searching for a place that is more authentic. I ended up working at Hamiltonian Artists in DC. That’s half an art Foundation and half gallery--they award grants to ten artists for two years for mid-career/emerging artists after they graduate. They teach how to set up an exhibition , how to make a catalog, all the things. 

I met you because we hired you to give a Taxes for Artists talk at Hamiltonian. Of all the things we did for artists there, this was the one I felt was the most impactful. Everything you were saying--it blew my mind that these are the things you need to succeed in the world--and it feels like a byproduct of this system that makes finances and money difficult to grasp--as if it’s actually on purpose, and people are in the dark. I loved how you broke it down for everyone. I kept seeing all these light bulbs going off for people. I sent you an email after your talk and told you that I wanted to do what you do.

I ended up leaving Hamiltonian Artists to be a full time yoga teacher. At that point, I was able to live off of credit. Up until then, i was making money, and I was able to rack up credit card bills but pay them off. I didn’t feel the full burden of it all until I left my job making good money, and went to yoga, making $300/4400 every two weeks as a yoga teacher. I was making a little more than minimum wage, but my take home pay was about $200 a week. 

I had to get on Medicaid and food stamps. I had to live off the system. I have a degree, I was born in this country, I speak English--all these things are to my advantage. I grew up in a first generation household. We were poor, but we had what we needed. This was the first time in my life I was broke.  I didn’t know how I would eat. I would go to the grocery store and get rice and tuna. That was very very hard. 

I eventually got promoted to be the assistant at the yoga studio. My pay checks went from $350 every two weeks to $600 every two weeks. It was a little more, but even so, I couldn’t do anything. I was trapped. I couldn’t pay the interest on my credit cards. I was rock bottom financially. I was in $35,000-$40,000 of credit card debt. That was due to trying to keep up with the Joneses. Yoga teacher training is cost prohibitive--yoga teachers usually come from privilege. You can’t make that little money and pay that teacher training off.

On these credit cards, the interest was high--I had about five rotating cards. I maxed them out until I couldn’t pay them. Each card was $500-600 month in just interest payments. This didn’t include rent or car, etc. I got some help from my mother, but it was like, “you need to get another job.”

I was in a bad place financially. It took a huge toll on my mental health. I was getting up at 4 am, working all day, teaching all day. Yoga teachers make about $20 per class. I was making $10.75/hour, and this was before taxes were taken out. 

It took a huge toll on every part of my life--I couldn’t see my friends, and any bit of money I had went to pay off these credit cards. What finally shifted things was Covid. For the first time in my life I was able to get assistance on my bills because of relief help. I got into a debt management program. Not debt consolidation. This company literally just takes over your payments. I can’t use them/touch them or open new lines of credit. They are like, “you can’t do this on your own, we are going to do it.” They cut it all off. That was step one--getting the credit card under control. This was just before quarantine. The deal was $800/month in credit card payments. They handled distribution, negotiated all the credit down to like 4% from the 20%. My payment was now $800 per month instead of $3000. 

But I still wasn’t making a lot of money. I was picking up side gigs. I was selling my plasma, taking side gigs, getting two hours of sleep per night. 

Hannah: That sounds exhausting.

Quarantine happened. I was able to negotiate no rent payments. My building was not up to code, so my rent was covered. I was able to catch up with stimulus payments and grants. I wrote myself grants - I took that skill I have from my art world training. I got money for that. In March I got laid off from my job. I was able to collect unemployment. For the first time in a couple years, I was making 3-4 times more than I was making before. That saved my life--making more money.

That changed it all. At the end of the day, the only thing that was going to get me out of the hole was making more money.

I negotiated half a car payment. So I had a car payment of $600, credit card payment of $800, rent payment of $1000, and this is just covering transportation, home and debt. It doesn’t cover my student loan, consolidation loan, nothing. I was negative almost $100,000 in my life in October 2019, making $300 per week. And that’s with a college degree. 

I was talking to my mom like, “how do you get ahead in this country?” The only way I could do it was help. I got help from the government. It caught me back up.

I know that Covid was really hard for a lot of people. But for me that had nothing to my name, getting stimulus, unemployment, and having the companies I owed money to slightly sympathetic to my situation--I was able to slowly slowly catch up. Meanwhile we’re going through this social revolution,  the end of a crazy presidency, George Floyd, those conversations, and in the fitness world, there were conversations about equity issues there. I was able to go back to work for double the pay I had been making. They basically matched unemployment. [Because of conversations about equitable pay in the yoga/fitness industry].

This was a big pay bump--a liveable wage. Now I was getting $1000 per paycheck, up from $300 the year previous. All this debt, the debt management program, I get financial relief--it helped me breathe again. 

 And we have a good friend of the family, who has no kids or grandkids. I call her my fairy godmother. She decided she wanted to buy me a house. She gave me $100,000 to buy a house. I wasn’t allowed to use it to pay off debt, or anything else. I live in Baltimore, where that can buy you a place. I put in an offer on a small lovely condo.

When it rains it pours. With a lot of luck--I was lucky that in my field there was a revolution about pay and compensation.. At the end of last year, I got promoted to be the manager of it all--my company and the region. I now make a bigger salary than I had in DC. I was also able to get grants for going back to school. A lot of things fell into place. After a lot of hard work and suffering, and only with a huge support system.

Hannah: So where are you today?

In October 2015, I had $100,000 in debt. Today, I have $45/50,000 in debt plus the asset of a home. Now that I know what I know, I wish I didn’t have to go through those things. This is why I love Sunlight Tax. So much of what we know about money is programmed subconsciously. Now I can pick up bookkeeping work. That has also helped. My mental health is better. I can feed me and my dog--I can now go to the grocery store and buy what I need.

Hannah: So what do you tell your friends now?

I tell people don’t get into credit card debt. You can maybe make the minimum payment, but when you have a whole college degree of debt on your credit card, you are going to screw yourself over. You are not going to catch up.

I am so over financial institutions. I tell everyone get a credit union at least. I love that they pick up the phone. They have the best interest rates. It’s like a co-op - you have say and control in what they put their money into. That helps a lot.

Living above your means is so tempting, especially when you’re young, and you want to do the same thing your investment banker friends do. It doesn’t help either that I’m from Miami. Everyone there is in so much debt. The average income there is $35,000. They have a fancy car, designer shoes, go out to fancy meals, buy $600 vodka at the club. 

It’s insane how much I had to struggle just to get to this point right here. Still with debt. But hopefully in about a year, that will be gone.

It was all help. I finally got help. You can have universal income, you can have free healthcare. The government just chooses not to.

Any extra money I get goes to my credit cards. Then my student loans.

“Buy in bulk” doesn’t help when you don’t have the money to buy even one roll of toilet paper. It costs you so much money to be poor. A bank can tell you you can’t get a house because you can’t afford the $800 mortgage payment, but they turn around and expect you to pay $1600 in rent. They just don’t value people - if they did, this behavior doesn’t make sense.

Just to exist in the world, there is a cost to live. Just to live in a house. Doing taxes, you see how many deductions and exemptions and credits you can get from owning a house - but only if you can get from this point. No 28 year old is just buying a house.. Especially with a 20% down payment.

I’m frustrated with the way the world is. It has been so hard for me, I can’t even imagine how hard it is for people who don’t speak English, or have all these benefits.

I can’t believe how hard it is to apply for benefits. I nearly gave up because it felt impossible. I had to get signatures from 10 landlords. It was a very demoralizing/dehumanizing experience. You have to tell everyone around you that you’re applying for food stamps. It’s really hard. And I live in an easy state - Florida, I have friends who can’t even get the unemployment they are owed. For people who have never had it hard, they just don’t get it. If I had kids - I don’t even know what I would do.

I want more people like me to be in the art world. This is layered. I love the art world, but it is so exclusive. A person of means, a person who can afford to have internships and make their way in that art history art pipeline. I want to be one of the voices to say “no, these other people should also be valued.” The things that add joy and value to your life aren't investment banking. I want people who bring humanity back into the world to be valued and compensated just as much as a money-maker (stock broker, hedge fund manager, etc). I want people in these roles--health and fitness, art--to have money knowledge so they can keep doing these things in the world, so they don’t have to leave. To give them the tools that rich white people use who have money to pay people to tell them what to do. I want to do that for people who don't have the background or the pedigree. I want to tell my friend, “don’t put that education on a credit card.” Teaching people how things snowball, and you have to live within your means. Right now, I don’t even need a budget - I pay my bills, then what is left over is what I have. But one day, I want to save more. The financial help I read in magazines doesn’t help you if you don’t have money to begin with. 

There is a huge amount of the population that lives like that--a dog chasing its own tail. But how do you get more money? How do you get it in your hands, and then what do you do with it? And how is it taxed?

I feel like I can speak to those people who are like me.

Why the PPP Loan is Good for Artists

Paddy Johnson of of VVrkshop and Hannah Cole of Sunlight Tax

This Q & A between Paddy Johnson of VVrkshop and ArtFCity and tax expert Hannah Cole on the Payroll Protection Program loan (PPP loan) explains how it can help artists. You don’t have to run an incorporated business to qualify. This money is a stimulus for you. ⁠⁠

Paddy and Hannah talk about loan terms, and our take home message: this is a forgivable loan that could help you. For many people, that could mean more time in the studio, a new body of work, or simply some extra peace of mind. Read the Q & A. Look into the loan if you haven't already. It's an easier application than almost any grant you'll apply for and might be more money too. ⁠⁠

PJ: What types of professions in the arts qualify for a PPP loan? 

HC: Absolutely everyone. There is no restriction.

If you are in a food or hospitality profession (look at the 6-digit code, called a NAICS code, in box B on the upper right corner of your Schedule C) with a NAICS code beginning with the digits “72” then you get special access to a bigger PPP loan (3.5 times your monthly income versus 2.5 times your monthly income for everyone else. This was meant to help the ailing restaurant and hospitality industries). But the PPP loan is meant for all professions.

PJ: Do I need to be running payroll?

HC: No. You don’t. This issue is confusing people. You are eligible for a PPP forgivable loan as long as you have “gross income” on line 7 of your Schedule C. As of the changes made in President Biden’s recent stimulus bill, you don’t even need to have a profit. 

PJ: Is the PPP loan forgivable? 

HC: Yes! In fact, it is designed to be 100% forgivable in most circumstances. This means that the loans are designed to turn into grants for almost everyone, so long as you spend the money on eligible expenses. Good news: this is really easy to do as a sole proprietor.

PJ: How much money are artists eligible for?

HC: You can receive up to 20.83% of your annual Gross Income. Loans are capped at $20,833 for sole proprietors without employees.

PJ: Can artists qualify for a PPP loan if they are receiving unemployment checks? 

HC: They can qualify. But receiving PPP money will likely reduce or eliminate their unemployment payments. You can re-apply for unemployment once your PPP money has run out, though. If you are depending on unemployment, you might not be a good fit for a PPP loan. Individual cases may vary, but if you made less than $25,000 on your Schedule C (“gross income” on line 7), then you are probably better off sticking to unemployment.

PJ: What is the difference between gross income and net income? In January loans were given out only for net. 

HC: The rules on this have changed. The current rule is that you may apply with “gross income” (line 7 of your Schedule C), instead of “net income.” Gross income is your income before taking out expenses. Net income is your profit after you subtract expenses. This change is great news because it gets you a bigger loan amount. 

PJ: Where can artists get a PPP loan? Are there better places to get PPP loans? (I had a poor experience with Chase and ultimately went through Newtek, which is an SBA lender.)

HC: You apply for a PPP loan through your bank. The big banks have demonstrably favored larger businesses and white men in this process. For this reason, Congress gave special access to funding to community-based lenders such as local credit unions. That’s because these institutions have a better history of supporting women-owned and BIPOC-owned businesses. There are also so-called “Fintech” companies that have been pretty helpful and streamlined getting PPP loan applications processed for Schedule C-filers, such as PayPal, QuickBooks, and Square. 

PJ: Where can artists find their Schedule C? Relatedly, there are five million places on a tax return that note gross and net income. How do artists know where to find the right one? 

HC: If you have freelance income, you have a Schedule C. Schedule C is part of your personal income tax return. It says Schedule C “Profit or Loss from Business Activities” at the top. Gross income is on line 7 of your Schedule C.

PJ: Do artists who have made more money in 2020 than 2019 qualify for a PPP loan? 

HC: Yes, they qualify if this is their first PPP loan. So long as you had gross income (line 7 on your Schedule C) in either 2019 or 2020, you are eligible. You don’t even need to have had a profit. If you are applying for a second round of PPP funding (i.e., you already got a first PPP loan), then you need to show that your income dropped by at least 25% in 2020 vs 2019. So the scenario in this question would then disqualify you from a second loan.

PJ: Is the loan taxable? 

HC: Nope! Loans aren't taxable as income (because they aren't income - you have to pay them back). And the bills have made it clear that the forgiven PPP loans, aka grants, are not to be included in taxable income. Normally a forgiven loan would be taxable income, but the PPP is special.

PJ: When can artists apply for loan forgiveness? 

HC: You apply once your funds are used up. You can apply for forgiveness any time between using up your funds and the maturity date of the loan. If you don’t apply for forgiveness by 10 months after the last day of your covered period, then you will need to begin paying it back.

PJ: How do artists track their spending so they don’t owe money they can’t pay back to the government? 

HC: I recommend that you open a separate bank account and deposit your PPP loan into that. That way, you transfer funds to your personal account as “owner compensation” at the approved amounts, and it easily documents these transfers for forgiveness.

PJ: How do artists calculate the approved payment amounts? 

HC: Presuming your loan was for the right amount, to begin with, making 10 equal transfers of 1/10th the loan amount from your specially-opened new PPP bank account into your personal account should do it. But please check with your bank for their latest guidance. 

PJ: Can the terms of loan forgiveness change? 

HC: I suppose it is possible. There have been a few rule changes so far, but generally, they have trended towards simplifying the process for freelancers, giving them better access to funding, and created more generous loans. 

PJ: Should artists apply for a PPP loan? 

HC: Yes. Except for people with small amounts of freelance income who are depending on unemployment. For most others, it's a great idea and will help you.

Money Management for Creative Professionals

Nerissa Street of Ten Thousand Women Ten Thousand Stages Podcast interviews art-centric tax expert Hannah Cole about her influences as an artist and as a tax expert for creative freelancers. This interview is available as both a podcast and a video, so you can choose the medium that you prefer.

Hannah Cole and Nerissa Street of Ten Thousand Women Ten Thousand Stages podcast

What do creative people need to know about the differences in tax laws between gig workers and employees? How much should you be saving in self-employment tax? How has the landscape changed in the current economy?

Hannah had two messages growing up: "Do what makes you happy!" and "Art won't make any money." How did that and her other experiences as an artist help her translate design needs into practical commercial benefit? They also talk about the stimulus bills and payments, deductions, and what you can look forward to in July if you have children.

Who benefits from the latest tax legislation? What has changed with business meal deductions this year?

You can either listen to the hour-long podcast here, or view it below via YouTube:

Startist Interview: Profit Motive, Marketing, and Tax Tips for Artists

Is your art a business or a hobby?

Hannah talks with Laura Griffin and Nikki May of Startist Society about her roots as an artist and about establishing a profit motive for your art business. She chats about empowerment for artists and how she got started in accounting after some bad experiences she had as an artist.

What should you use to track expenses? How and what expenses are deductible? Can donated artwork be deducted? Do I need to collect sales tax? Find out the answers in this podcast interview relevant to creative freelancers in the US.

Hannah discusses what things in nature and the outside world inspire her as an artist and how to slow down to look at things that most people don’t notice. How does she choose what she paints in her art practice?

They talk about using your left brain vs. right brain and balancing art and your business practice. Hannah goes into depth about how to show the IRS that your art is a business and not a hobby. They discuss how to show a profit motive through your activities and record-keeping—even if your business is not yet generating a profit.

Hannah gives specific information about tracking business expenses and receipts with examples that pertain to creative people. She also discusses how LLCs are legal and not a tax entities. They explore how to prevent tax audits and common deductible expenses, including details about mileage, business meals, donations, etc.

Money Bootcamp is an annual membership for creators to get you set up right and tracking all the right things without wasting your time. You'll have more time for creative pursuits when you stop worrying about your finances and money.

What’s in the $1.9 Trillion stimulus plan?

The American Rescue Plan, Biden’s $1.9 Stimulus Bill, will be an enormous boost to the US economy. Here’s a brief rundown of the items most likely to affect freelancers.

Stimulus payments:

New $1400 stimulus payments will go out per person on the return. This means that children and other dependents will get the full $1400 each, in addition to the taxpayers. Households with income under $150,000 (married filing jointly) and individuals with income under $75,000 will receive the full benefit. Households with income between 160,000 and 150,000 will get a reduced payment, as will individuals with income between $75,000 and $80,000. 

Unemployment:

Unemployment benefits have been expanded by an extra $300/week, and extended to September 6. In addition, unemployment benefits from 2020 will not be taxable up to $10,200 per person ($20,400 in a married filing joint couple). This benefit is retroactive, meaning that it will take effect on your 2020 tax return. If you have already filed your 2020 return, the IRS will do the calculation for you and send you a refund of the taxes you paid on your 2020 unemployment. Do NOT file an amended return. 

Money for families with children:

The American Rescue Plan will help families enormously. For 2021, the Child Tax Credit will be expanded from $2000 per child to $3600 per child under 6, and $3000 per child age 6-17. Notably, taxpayers will not need to wait until tax time to claim the credit. Payments will be sent directly to families in monthly installments starting in July 2021. These payments will go to married-filing-joint families earning under $150,000, heads of household earning under $112,500, and married-filing-separate families earning under $75,000. You may calculate your credit using a choice of either your 2019 or your 2020 income - whichever gets you the bigger credit.

The dependent care credit is enhanced for 2021. It will increase to $8,000 for 1 child or $16,000 for 2 or more children. The credit is for 50% of the costs of childcare, which include (as always) babysitters and summer camps so that the parent(s) can work. This means that the maximum credit will be $4000 for one child or $8000 for 2 or more (that is 50% x the cost of care up to $8000 for one child or $16,000 for two). The credit phases out starting at household income of $125,000 (married filing joint), to a reduced benefit of 20% of costs, but a reduced credit amount is still available for families with income up to $400,000.

The Supplemental Nutrition Assistance Program (SNAP) benefit will be increased 15% through September. And K-12 schools will receive over $120 billion in additional funding.

Earned income tax credit (EITC) expansion:

The Earned income tax credit is expanded. It will now include several groups who were not previously eligible:

• Age 19 if not a student

• Age 24 if a student

• Age 18 if an eligible foster child

• The age 65 upper limit for the EITC is repealed

Whereas the EITC in its original form was targeted primarily at working families with children, the EITC formula is now enhanced for single people with no children.  As with the child tax credit, you may calculate your credit based on 2019 or 2020 income; whichever provides you the bigger credit.

Teacher deduction:

The $250 deduction that K-12 teachers currently receive for classroom supplies paid for out of pocket has been expanded to include the purchase of PPE/sanitizer. The deduction amount remains $250.

Student Loans: 

The bill does not provide forgiveness for student loans, as many had hoped. However, any student loans forgiven between 2021-2025 will be tax free. This is a benefit, because forgiveness of debt would normally be considered taxable income.

Healthcare:

For those who have lost a job or had hours cut, the government will cover the full cost of COBRA health coverage through the former employer from April 1 through September 30th.

If you bought health insurance through a government exchange, the cost has been lowered to no more than 8.5% of your total income. This will be automatically applied--so there is no need to take additional action. 

For those who would consider buying marketplace health insurance if the prices were more affordable, the open enrollment date has been extended through May 15. You may also use the open enrollment period to switch from your current plan to a lower-priced plan.

Premium tax credits--the advanced payments made to taxpayers that subsidize the cost of their marketplace health insurance--are affected by the law, too. Normally, taxpayers are only eligible for premium tax credits if they have income between 100% and 400% of the Federal poverty level. For 2021, that cap is removed, making more people eligible for premium tax credits. Additionally, under normal circumstances, a taxpayer whose income rises above 400% of the poverty level has to pay back some or all of their advanced credits. For 2020 taxes, this payback will be forgiven altogether. And lastly, if unemployment income raised your income level above the threshold to qualify for premium tax credit health care subsidies, it will not be counted as income in consideration of the premium tax credit. 

Grants for Restaurants:

There is a new $30 Billion grant program called the Restaurant Revitalization Grant program. This will give money to struggling restaurant and food service businesses, with $5 Billion earmarked for businesses with gross receipts under $500,000. To check your eligibility and application requirements, see the Small Business Administration website for details and the latest updates.

All in all, the Biden stimulus bill, the American Rescue Plan, will put money in the pockets of the people in the US who need it most. It takes a big step toward a guaranteed income for families with children, lowers healthcare costs, and knits up some of the holes in our social safety net.