Just to add another perspective - my partner and I were in exactly this situation 2 years ago. We weren't married, I claimed our daughter on my taxes for the childcare benefit through my work, and she had our daughter on her health insurance. The key thing that worked for us was keeping really good records. I documented all the expenses I paid for our daughter (diapers, clothes, childcare, etc.) to show I provided more than half her support. We never had any issues with either the IRS or the insurance company. Just make sure you're actually providing more than half the financial support if you're claiming the child as a dependent. If your girlfriend is paying more than half the expenses, technically she should claim the child, not you.

Congratulations on becoming a dad soon! This is definitely a confusing area, but the good news is that you're overthinking it a bit. Health insurance coverage and tax dependency are completely separate systems with different rules. Your girlfriend can absolutely add your son to her health insurance while you claim him as your tax dependent. There's no requirement that the person providing health insurance must also be the one claiming the child on their taxes. These benefits operate independently of each other. For your work's childcare subsidy, they only care that you legitimately qualify to claim your son as a dependent on your tax return. This means you need to provide more than half of his total support for the year and he needs to live with you for more than half the year (which should be easy since you live together). The IRS won't have any issues with this arrangement, and your employer's childcare benefit program won't either. Just make sure you and your girlfriend don't both try to claim him as a dependent on your respective tax returns - only one of you can do that, and it should be whoever actually provides more than half of his financial support. Keep good records of what you're paying for (formula, diapers, clothes, medical expenses not covered by insurance, etc.) to document that you're providing the majority of his support. This will help if you're ever questioned about your dependent claim.

This is such a comprehensive discussion - thank you all for sharing your experiences! As someone who handles estate tax matters professionally, I wanted to add a few additional considerations that might help with your situation and others reading this. First, regarding the step-up in basis question that keeps coming up - while it's true that installment obligations generally don't receive a step-up, there's a nuance worth mentioning. If the decedent had the right to accelerate the note or if there were any modifications to the original terms after death, this could potentially change the analysis. The lien provision you mentioned is interesting because it essentially gives you a reversionary interest in the property - while this doesn't create a step-up, it might affect the note's valuation for estate purposes. For the estate vs. direct distribution question, I'd recommend formally documenting these as "distributions in kind" rather than trying to retroactively pull money back into the estate. Since you're the executor and the distributions align with the will's intent, most courts will accept this with proper documentation in your final accounting. One thing I haven't seen mentioned is the potential impact of the Tax Cuts and Jobs Act on your situation. Depending on when the original sale occurred and the nature of the business assets, there might be Section 1202 qualified small business stock benefits or Section 199A deductions that could apply to reduce your overall tax burden on these payments. Also, given the interstate complexity, make sure you understand each state's statute of limitations for inheritance tax assessments. Some states have longer periods than others, and proper documentation now could save significant issues later. The resources mentioned like taxr.ai and claimyr.com sound helpful for getting specific guidance, especially when dealing with the technical aspects of continuing installment elections and multi-state filing requirements.

I've been dealing with inherited installment notes for the past few years as a tax professional, and I wanted to address a few points that could significantly impact your situation. First, regarding the estate distribution approach - since you're the executor and distributed according to the will's residuary clause, you can definitely clean this up by documenting these as "advance distributions" in your final estate accounting. The key is proper documentation rather than trying to reverse what's already been done correctly. For the tax treatment, you're unfortunately correct that there's no step-up in basis for the installment obligation itself. However, I'd recommend having someone review the original 2019 sale documents to ensure the installment election was properly made and that you're calculating the gain percentage correctly. Sometimes there are nuances in the original transaction (like depreciation recapture or different asset categories) that can affect the ongoing reporting. One thing I haven't seen mentioned is that you should verify whether your mother made any estimated tax payments on the installment income during 2024. If she did, the estate might be entitled to refunds that could offset any additional tax compliance costs you're facing. Given the interstate complexity (NC/KY) and the multi-beneficiary situation, I'd strongly recommend getting professional help. The cost of getting this wrong - especially with potential multi-state audit exposure over the remaining years of payments - far exceeds the upfront investment in proper guidance. Most estate tax specialists can give you a flat-fee quote once they review your specific documents. The resources others mentioned like taxr.ai for the technical calculations and claimyr.com for IRS guidance could be helpful supplements to professional advice, but given your complexity, I wouldn't rely on them exclusively.

Don't forget you can also deduct tuition and fees as an adjustment to income (above-the-line deduction) instead of taking a credit. Sometimes that works out better depending on your tax situation.

I went through this exact same confusion last year! Here's what I learned from my research and talking to a tax professional: The 4-year AOTC limit follows the student, not the taxpayer, so those years your parents claimed it definitely count toward your total. Based on your description, you're likely at 3 years used (2016, 2017, 2021) with potentially one more if you claimed it in 2019 or 2020. A few additional tips beyond what others have mentioned: 1. If you can't easily access your parents' old returns, they can call the IRS directly and request information about education credits claimed for your SSN - the IRS can provide this over the phone. 2. When reviewing your own returns, look specifically for Form 8863 Part I. If you see "American Opportunity Credit" checked with your info, that's a used year. 3. Consider timing strategically - if you only have one AOTC year left, save it for when you'll have the highest qualified expenses to maximize the $2,500 credit. 4. Remember that qualified expenses for AOTC include tuition, fees, and required course materials (books, supplies, equipment), but not room and board. Good luck with your education financing! The credit tracking can be frustrating but it's worth getting it right.

One extra thing to check - some brokers actually include the dividend payments for shorts in the "Fees and Expenses" section of your annual statement rather than on the 1099-DIV. My broker (Interactive Brokers) does this and it caused me a lot of confusion. You might want to look through your entire brokerage statement to see if they've documented these payments somewhere else. If they have, they might provide instructions on how to properly report them.

I shorted Apple last year and paid out dividends. The way I handled it (confirmed by my CPA) was: 1. Report the full dividend amount from my 1099-DIV on Schedule B 2. The dividend I paid on my short sale gets added to the cost basis of the short position 3. When I closed my short position, the adjusted basis meant I had a smaller gain So you're not really "deducting" it directly from your dividend income. You're adjusting the cost basis of the short sale transaction, which affects your capital gain/loss instead.

Has anyone here actually been audited over HSA stuff? I've used mine for non-medical things a few times (under $200) and just paid the penalty on my tax return. Nothing ever happened.

I understand the frustration with having money tied up in an HSA that feels unusable! Before you risk the penalties though, I'd suggest taking a broader look at what actually qualifies as medical expenses. Beyond the obvious doctor visits and prescriptions, you can use HSA funds for things like: - Over-the-counter medications (pain relievers, allergy meds, etc.) - Menstrual products - Sunscreen (SPF 15+) - First aid supplies - Thermometers and blood pressure monitors - Even some mental health services You might also want to save old receipts going forward - you can reimburse yourself years later for qualified expenses, so even if you pay out of pocket now, you could pull that money out of your HSA later when you find eligible receipts. The 20% penalty plus income tax really adds up, especially when there are legitimate ways to use those funds that you might not have considered yet.