Unfortunately, there aren't many ways to spread out the gain from selling a single asset like your classic car over multiple years. The sale is treated as occurring in the tax year when the transaction closes, so the entire gain gets recognized at once. However, there are a few strategies you might consider: 1. **Installment sale method** - If the buyer is willing, you could structure the sale to receive payments over multiple years (like $50K this year, $45K next year). This would spread the gain recognition across tax years, but it does come with risks if the buyer defaults. 2. **Like-kind exchange (Section 1031)** - This generally doesn't apply to personal-use vehicles, but if you could argue the car was held for investment purposes (which might be difficult given it was a hobby project), you could potentially defer gains by exchanging into another qualifying asset. 3. **Charitable strategies** - If you're charitably inclined, you could donate a portion of the car's value to charity and sell the remainder, though this gets quite complex. For California specifically, yes, you're looking at some of the highest combined capital gains rates in the country. The timing strategy of waiting until January could be very beneficial if either of your incomes will be significantly lower next year. Also consider whether you have any capital losses to harvest from other investments before year-end to offset some of the gain. Given the complexity with state taxes, Medicare impacts, and the significant dollar amounts involved, a consultation with a tax professional who handles high-value personal property sales would definitely be money well spent before you commit to the sale.

Welcome to the community, Fatima! Great questions that really add to this discussion. For the installment sale method, yes, you'd need formal documentation even for something as "simple" as two payments. The IRS requires written agreements specifying payment terms, interest rates (using applicable federal rates), and what happens if payments are missed. You'd also need to calculate the gross profit percentage and recognize gain proportionally with each payment received. It's definitely not a casual arrangement - both parties need to understand the legal and tax obligations. Regarding the charitable donation strategy - you're absolutely right that donating to a qualified automotive museum or educational charity could provide a significant tax deduction based on fair market value. However, there are some important limitations: for non-cash donations over $5,000, you need a qualified appraisal, and deductions over $500,000 require additional IRS approval. Plus, if your adjusted gross income isn't high enough, you might not be able to use the full deduction in one year (though you can carry forward unused portions for up to five years). The key consideration is whether Ava and her husband need the cash now versus the potential tax savings over time. Given they mentioned wanting to pay down their mortgage, the immediate cash might be more valuable than the deduction benefits. One thing I'd add for anyone in this situation - document EVERYTHING about your restoration process going forward. Take photos, keep receipts, maintain a restoration log. Future you will thank present you for the organization when tax time comes!

I totally get your stress about this situation! 😊 As someone who's been through a similar experience with side income, I wanted to share what helped me navigate this without losing my mind. First off, you're absolutely doing the right thing by asking about this now. The IRS actually has a lot of respect for people who proactively try to comply, so you're already on the right track! Here's what I learned when I was in your shoes: • Yes, you'll need to report income over $400 on Schedule C (self-employment) • Start tracking everything going forward - even a simple phone note works • Save receipts for ANY babysitting-related expenses (gas, snacks for kids, activities, etc.) • Consider setting aside 20-25% of each payment for taxes One thing that really helped ease my anxiety was using the IRS Free File software (available on IRS.gov) - it walks you through everything step by step and is specifically designed for situations like yours. Also, since you're caring for your mom, definitely look into caregiver tax credits when you file. There might be deductions available that could help offset some of what you owe on the babysitting income. The most important thing to remember: the IRS isn't trying to "catch" people who are making honest efforts to comply. You're being responsible by asking these questions, and that counts for a lot. Take it one step at a time - you've absolutely got this! 💪 Have you been able to estimate roughly how much you've made babysitting so far this year?

Hey Yuki! 💙 I can really feel the stress in your post, and I want you to know that you're definitely not alone in this situation! I actually went through something very similar when I started doing some occasional house-sitting for extra income while also caring for my elderly father. First, let me echo what others have said - you're absolutely doing the right thing by asking these questions now rather than ignoring the situation. That shows real responsibility and good faith effort, which the IRS genuinely appreciates. Since you're making $150-200/week, you're definitely over the $400 annual threshold, so yes, you'll need to report this as self-employment income on Schedule C. But here's what helped me get through the stress of it all: • Start simple - even just a note in your phone with date/amount for each babysitting session going forward • Keep track of ANY expenses related to the work (gas to their house, snacks/activities for kids, even educational materials) • The free IRS VITA program can help you file if your income qualifies - they're specifically trained for situations like this • Since you're caring for your mom, definitely explore caregiver tax credits that might help offset what you owe What really helped my anxiety was calling the IRS Taxpayer Assistance line (1-800-829-1040). I was terrified to call, but the person I spoke with was incredibly patient and walked me through exactly what I needed to do. They're there to help, not to intimidate! One last thing - you have until April 15th to get this sorted, so there's no need to panic. Take it one step at a time. You're clearly a caring, responsible person who's working hard to support your family. You've got this! 🌟

This thread has been absolutely amazing! I just went through a very similar situation last year and wish I had found this discussion earlier. I owned a home for 17 years - lived in it as my primary residence for 13 years, then rented it out for 4 years before selling. Like many others here, I initially calculated my exclusion using the proportional method (13/17) and was expecting a huge tax bill. After reading through all these experiences, I realized I had been overthinking it completely. Since my rental period came AFTER my primary residence years, those 4 rental years didn't count as "non-qualified use" for the exclusion. I was able to exclude almost my entire $140k gain except for the depreciation recapture on the $26k I had claimed during the rental years. The depreciation recapture at 25% cost me about $6,500 instead of the $35k+ I was originally planning to set aside for taxes. What a relief! I ended up using one of the AI tools mentioned earlier in this thread to double-check my calculations, and it was incredibly helpful in walking me through the proper application of these rules. The tool even helped me identify some home improvements I had forgotten about that further reduced my taxable gain. For anyone still reading through this thread who's in a similar situation - definitely don't assume the proportional calculation is correct. The actual tax law is much more favorable for conversions from primary residence to rental. Just make sure you get professional confirmation before filing!

This has been such an enlightening discussion! I'm currently dealing with a property sale where I lived in the home for 9 years as my primary residence, then rented it for 2 years before selling last month. Reading through everyone's experiences here has been incredibly reassuring. I was initially calculating based on a 9/11 ratio (about 82% exclusion), but now I understand that those 2 rental years after my primary residence period don't count as "non-qualified use" under the current tax rules. I claimed about $11k in depreciation during those rental years, so it looks like I'll only owe the 25% recapture tax on that amount (roughly $2,750) rather than the much larger capital gains tax I was expecting to pay on a significant portion of my $75k gain. What really strikes me is how this favorable rule for post-residence rental periods isn't widely known. I've talked to several people who went through similar situations and none of them were aware of this distinction. It seems like the proportional calculation is what most people default to because it feels logical, but the actual tax law is more generous than that. I'm definitely going to look into some of the tools mentioned throughout this thread to get confirmation before I file. With the peace of mind that would provide, it seems worth it to make sure I'm applying these rules correctly and not leaving money on the table or making any errors. Thanks to everyone who shared their knowledge and real-world experiences here - this community discussion has been incredibly valuable!

I actually called my state's tax department about this exact question last month. Depending on your state, many offer what's called a "manufacturer's exemption" that applies to small businesses creating products. In my state (Michigan), I don't have to pay use tax on materials that directly go into my final products. The lady I spoke with said I should fill out Form 3372 and provide it to my suppliers to avoid being charged sales tax on qualifying purchases. Worth checking if your state has something similar!

As someone who's been dealing with this for my soap making business, I can tell you the key is figuring out what your state considers "for resale" vs "for business use." In most states, raw materials that become part of your finished product (like your beads, wire, and chains) are exempt from use tax if you have a resale certificate - because you're essentially buying them to resell as part of your jewelry. But here's what tripped me up at first: things like your tools, packaging that doesn't transfer to customers, office supplies, and equipment are usually subject to use tax if you didn't pay sales tax when buying them. My advice is to start simple - get your resale certificate first (usually free from your state's revenue department), then keep two lists: one for materials that go into products, and one for everything else you buy out-of-state without paying sales tax. Most states let you report use tax annually with your regular tax filing. The good news is most states have a minimum threshold before you even need to worry about this - often around $500-1000 in taxable purchases per year. Don't let the paperwork scare you away from keeping your business compliant!

Does anyone know if using both an FSA and HSA in the same year is allowed? I thought you couldn't have both but the original poster mentioned using both. I'm so confused about all these health accounts!

This is exactly the kind of HSA confusion that trips up so many people! The key thing to remember is that your HSA is like a savings account - money can go in and out multiple times throughout the year for various reasons. When you reimburse yourself from your HSA for medical expenses, then later receive insurance money that you deposit back, you're essentially "undoing" part of that original distribution. The IRS recognizes this is a normal part of how medical expenses and insurance work together. For your Form 8889, stick with the W-2 Box 12W amount on line 9 as others have mentioned. The 5498-SA will always show higher numbers when you're redepositing insurance reimbursements because it captures all the money flowing into the account, not just your original contributions. Keep detailed records of all your medical expenses, HSA distributions, and insurance reimbursements. This paper trail will be invaluable if you ever need to explain the transactions. You're handling this correctly - the orthodontic work is a qualified medical expense, and redepositing insurance reimbursements is completely allowed and encouraged by the IRS.