Don't forget to keep detailed records of ALL your home improvements and renovations! I see you mentioned doing some work that would adjust your basis upward. Things like new flooring, kitchen renovations, bathroom upgrades, HVAC systems, roofing, windows, and even some landscaping can all increase your cost basis and reduce your taxable gain. We kept receipts for everything over the years and it reduced our gain by about $45,000 when we sold. The IRS requires documentation, so make sure you have invoices, permits, and proof of payment. Regular maintenance doesn't count, but actual improvements that add value or extend the life of your home do. With your $210,000 gain being well under the $500,000 joint exclusion anyway, this might not change your tax situation, but it's always good to have everything properly documented.

Looking at your numbers, you're actually in a great position! With a $210,000 gain and the $500,000 married filing jointly exclusion, you shouldn't owe any capital gains tax on this sale regardless of whether you file jointly or separately. The math works out the same either way since your gain is well under both the $500k joint limit and would be under the combined $500k if you each claimed $250k separately on your respective halves. However, I'd strongly recommend filing jointly anyway. You'll likely get better overall tax treatment on your other income, and you won't have to deal with the restrictions that come with married filing separately (like both spouses having to itemize or both taking standard deduction, income limits on various credits, etc.). The real value here is making sure you document all those renovations properly to maximize your basis adjustment. Even though you're already under the exclusion limit, having good records protects you if the IRS ever questions the numbers, and it's a good habit for future property transactions.

Great question! I actually went through a similar situation when my spouse worked for a county in Connecticut while we lived in New Hampshire. The good news is that your strategy should generally work, but there are a few things to keep in mind. Once you roll the 457 into an IRA, it typically becomes subject to the tax laws of your state of residence when you take distributions, not where it was originally earned. The rollover essentially "cleanses" the connection to the original state and employer. However, I'd recommend a few precautionary steps: 1. **Document everything**: Keep records of the rollover process and make sure all your residency documentation is rock solid (driver's license, voter registration, etc.) in your no-income-tax state. 2. **Check for specific state provisions**: Some states have tried to claim tax on government employee retirement benefits even after rollover. Since you mentioned High Tax State is aggressive, it might be worth having a tax professional review their specific statutes. 3. **Consider timing**: You might want to wait until after your wife stops working in High Tax State before doing the rollover, just to avoid any potential complications during the transition. The IRS treats rolled-over 457 funds as regular IRA money, and most states follow this treatment. But given that this involves a government 457 plan and an aggressive tax state, a consultation with a tax pro familiar with that specific state's rules would give you peace of mind. Better to spend a few hundred on advice now than deal with an audit later!

This is a great question that many government employees face! The general principle is that retirement distributions are taxed by your state of residence at the time of withdrawal, not where the money was originally earned. Once you roll the 457 into an IRA, it should be treated like any other IRA for tax purposes. However, since you mentioned High Tax State is aggressive with taxes, I'd recommend being extra careful about establishing and maintaining clear residency in your no-income-tax state. Some states have specific provisions for government retirement benefits, and you don't want to give them any reason to claim you as a resident. A few key steps: make sure all your official documents (driver's license, voter registration, bank accounts) are in your no-income-tax state, spend the majority of your time there, and keep good records. The rollover should effectively sever the connection to the original state, but documentation is your friend if questions ever arise. Given the complexity and the fact that this involves a government 457 plan from an aggressive tax state, it might be worth consulting with a tax professional who's familiar with multi-state retirement planning. A few hundred dollars in professional advice now could save you thousands in potential issues down the road.

Does anyone know if FreeTaxUSA handles backdoor Roth conversions better than TurboTax? I'm about to do my first conversion and trying to decide which software to use.

Just wanted to add my experience for anyone else dealing with this confusion. I did my first backdoor Roth conversion last year and had the exact same panic when I saw the blank line 8 on Form 8606! What helped me understand it was realizing that the IRS views this as a "nondeductible contribution followed by a distribution" rather than a direct "conversion." So the form is structured to track your basis (the after-tax money you put in) and separate it from any earnings. In your case, you contributed $17,300 of after-tax money, it earned $7.25, and then you distributed $17,300 of it to convert to Roth. The $7.25 that's still sitting in your traditional IRA will be fully taxable if/when you convert it later since it's all earnings. One thing to keep in mind for future years - if you plan to do backdoor Roth conversions regularly, try to convert quickly after making the contribution to minimize any earnings that build up. Makes the tax reporting much cleaner!

Something similar happened to me and it turned out I had checked the wrong box on step 2 of the W4. I had checked 2(b) which is the "use the multiple jobs worksheet" option instead of 2(c) "if there is only one job total". This made the system think I needed to withhold at a higher rate to cover multiple jobs. Rookie mistake but easy to fix!

The W4 form definitely takes some getting used to after the old allowances system! Based on your situation, I'd suggest double-checking a few key areas: 1. **Step 1**: Make sure you selected "Married filing jointly" not "Single or Married filing separately" 2. **Step 2(c)**: Since your spouse doesn't work, you should check the box that says "If there is only one job total" 3. **Step 3**: Enter $2,000 for your child (qualifying children under 17 get the full Child Tax Credit) Missing any of these could easily cause the overwithholding you're experiencing. The good news is you can submit a corrected W4 to your payroll department anytime - it usually takes effect within 1-2 pay periods. For future reference, the IRS Tax Withholding Estimator tool on their website is really helpful for getting your withholding dialed in perfectly. It walks you through your exact situation and tells you exactly what to put on each line of the W4. Don't worry about the money already over-withheld - you'll get it back as a refund when you file your taxes!

Don't forget about tax treaties! Depending on what country you're from, there might be provisions in the tax treaty between your home country and the US that could affect your tax status. Some treaties have special rules for students that extend beyond the normal 5-year exemption period. Worth checking if your country has such provisions!

This is such a common confusion for people with complex visa histories! I went through something very similar a few years ago. One thing that might help clarify your situation: the IRS has a specific worksheet in Publication 519 (U.S. Tax Guide for Aliens) that walks you through determining your status step by step. It's called the "Substantial Presence Test" worksheet and includes special calculations for students. Since you mentioned TurboTax classified you as a resident but you expected to be non-resident, I'd recommend double-checking a few things: 1. Did you file Form 8843 in previous years (2013-2016)? This form is required for exempt individuals and helps establish your exemption history. 2. Make sure to count ALL days of physical presence, including partial days (arrival/departure days count as full days for the test). 3. Check if your home country has a tax treaty with the US that might provide additional student exemptions beyond the standard 5 years. The good news is that if you determine you filed incorrectly, you can always amend your return. But getting it right the first time will save you hassle later! Also, keep detailed records of your entry/exit dates - I-94 records are available online and can help you reconstruct your presence history accurately.