Great discussion here! One thing I'd add is to make sure you're tracking your adjusted basis in the business properly. For partnerships and S-Corps, you can only deduct losses up to your basis in the entity. Your basis includes your initial investment plus any additional capital contributions, plus your share of entity debt (for partnerships), minus any distributions you've received. If your losses exceed your basis, the excess gets suspended and carries forward until you have sufficient basis to use them. This is especially important if you've been taking distributions from the business in prior years - those reduce your basis and might limit how much loss you can currently deduct. I'd recommend having your accountant calculate your current basis before making any decisions about stock sales.

Based on everything discussed here, it sounds like you have several important factors to consider before selling those stocks: 1. **Material participation**: Since you actively run the business, your K-1 losses should qualify as ordinary losses that can offset capital gains. 2. **Tax efficiency**: As Pedro mentioned, using business losses against ordinary income (taxed at higher rates) is usually more beneficial than offsetting long-term capital gains (taxed at preferential rates). 3. **Basis limitations**: Make sure you have sufficient basis in the business to actually deduct the full amount of losses this year. 4. **Excess business loss limits**: Watch out for the $305,000/$155,000 thresholds that Mae mentioned. Given the complexity here, I'd strongly recommend modeling different scenarios with your accountant before making any stock sales. You might find it's better to: - Use the business losses against your ordinary income this year - Hold the appreciated stocks for a future year when you don't have business losses - Or potentially harvest some losses from other investments instead The tax savings from strategic timing could be substantial, so it's worth taking the time to plan this properly rather than rushing into stock sales.

I've been following this discussion with great interest as someone who's currently in the research phase of making a similar transition. The insights about South Dakota vs Florida have been really valuable. One aspect I haven't seen mentioned yet is healthcare considerations. When you establish residency in SD or FL and then spend most of your time abroad, how do you handle health insurance? Most US health insurance plans have limited or no coverage internationally, and if you're trying to qualify for FEIE, you're spending 330+ days outside the US. I've been looking into international health insurance plans, but I'm wondering if maintaining a US-based plan is necessary for when you do return to your state of domicile for those periodic visits to maintain residency ties. Also, for those who've successfully made this transition - did you face any challenges with maintaining professional licenses or certifications that require a US address? I have a few professional certifications that need to be renewed periodically, and I'm not sure how they handle mail forwarding addresses. The tax savings are obviously attractive, but I want to make sure I'm thinking through all the practical implications before making the jump. Any insights on these aspects would be greatly appreciated!

This is such a timely discussion! I'm a tax preparer who works with a lot of remote workers, and I wanted to add some practical considerations that might help with your decision. One thing to keep in mind is that both Florida and South Dakota have different banking relationships and business ecosystems. South Dakota has historically been more welcoming to the financial services industry, which can sometimes make banking relationships smoother for nomads. However, Florida has more extensive consular services if you need passport renewals or other services while abroad - they have consulates and honorary consuls in many countries that SD doesn't. Regarding the FEIE, I've seen people get tripped up by the "tax home" concept. The IRS defines your tax home as your main place of business, not your domicile or where you file state taxes. If you're a W2 employee working remotely, your tax home might still be considered the US unless you can demonstrate that your main place of business has shifted abroad. This is different from the physical presence test, which is more straightforward. Also, don't forget about the impact on your Social Security benefits calculation if you're planning to spend significant time abroad. Working abroad while using FEIE can affect your future Social Security benefits since excluded income doesn't count toward your earnings record. Have you considered consulting with a tax professional who specializes in expat taxation before making your final decision? The upfront cost could save you significant headaches and money down the road.

same boat fam. filed march 2023 still nothing 😭

Have you tried requesting your account transcript from the IRS website? That'll show you if there are any hold codes or issues that aren't visible in the "Where's My Amended Return" tool. I was stuck for 18 weeks and found out through my transcript that they had flagged my return for additional review. Once I knew the specific issue, I was able to call with the right information and get it resolved much faster. The transcript is free and gives you way more detail than the basic tracking tool.

Just to add another perspective - don't forget about Qualified Business Income deduction (Section 199A) in your calculations. If your business becomes profitable in future years, you might be eligible for up to a 20% deduction on your qualified business income. If you push too many deductions into future profitable years through depreciation, you might inadvertently reduce your QBI deduction. Sometimes it's better to take the hit now when you're showing a loss, especially if your W-2 income puts you in a decent tax bracket already.

As someone who's been through this exact scenario with my freelance graphic design business, I'd recommend being really strategic about this decision. You're in a unique position where you can use the business loss to offset your W-2 income, which could save you significant money this year. One thing I learned the hard way is to keep meticulous records showing your profit motive - the IRS hobby loss rules are real and they do scrutinize new businesses showing losses. Document your business plan, marketing efforts, client outreach, etc. This becomes especially important if you show losses for multiple years. For the equipment strategy, I'd suggest looking at which items are likely to become obsolete quickly (software, some electronics) versus durable goods (quality microphones, mixing boards). Consider fully expensing the items that depreciate rapidly in real-world value while using regular depreciation for equipment that will serve you for many years. Also, make sure you're capturing all possible business deductions - home office space, business use of your car for client meetings, professional development, etc. These can add up and help justify the business nature of your activities to the IRS. The royalty income on Schedule C makes perfect sense given that it's the same type of work as your current business. This actually strengthens your case that this is a legitimate business continuation rather than a new hobby.

i had a 5k overpayment in 2021 and they took my refunds for 2 years straight. its rough but atleast its a way to pay it back without coming out of pocket

Just went through this exact same thing with Indiana UI last year. They'll definitely take your federal refund through TOP if you don't act fast. Call Indiana's unemployment office ASAP to set up a payment plan - even if it's just $50/month, it shows good faith and might prevent the offset. Also request a hardship waiver if you qualify. The offset usually happens within 2-3 weeks of your return being processed, so time is critical here.