Looking to start flying on VATSIM. Held off for awhile because I didn't want to wake others with IFR clearances and readbacks when I'm flying late in the evening, but I just discovered there is an option to answer the controller via text. Any etiquette around this option? Is it something that's commonly used by pilots or is it something more discouraged?

Not a controller but someone who has utilised this feature.

The option is there to be used. There can be many valid reasons people cannot or do not want to use voice on their part and VATSIM acknowledges that.
If you can accept voice from the controller it makes their job a little easier, of course. Just don't be too verbose in your typed responses e.g. if a controller clears you to a certain flight level your typed response would be "clrd FLxxx". No need for your callsign or a full blown 'cleared to flight level xxx".