Has anyone used TurboTax to handle this situation? I've got almost the identical scenario (seller paid part of my points) but I can't figure out where to enter the points not on the 1098. The software keeps wanting me to just enter what's on the form.

I actually had a very similar situation when I bought my house two years ago. The key thing that helped me was understanding that seller-paid points are treated differently than if you had just negotiated a lower purchase price. What you're describing is exactly right - report the $6,500 from your 1098 on Schedule A line 8a, and the additional $6,000 on line 8c. The basis adjustment is crucial because when you eventually sell, you'll need to account for the fact that the seller effectively paid part of your mortgage costs. One thing I'd add is to keep really good documentation of this transaction. Save your closing disclosure, the 1098, and any notes about how the seller credit was applied. I've heard that this particular scenario sometimes gets flagged for review because the IRS wants to make sure people aren't double-counting deductions. Also, make sure the $6,000 was actually applied to points and not just general closing cost credits. Your closing statement should clearly show this breakdown. If it's ambiguous, you might want to get clarification from your lender or closing attorney before filing. Overall though, your understanding sounds spot-on. It's one of those tax situations that seems complicated but is actually pretty straightforward once you understand the logic behind it.

This is such a helpful thread! I'm dealing with a similar situation but with a twist - I inherited my rental property from my grandmother in 2019 and have been depreciating it since then. When I sell it, do I only pay the 25% recapture rate on the depreciation I've taken since inheriting it, or does it somehow include depreciation she took before I inherited it? The property had a stepped-up basis when I inherited it, so I'm hoping that means I'm only on the hook for my own depreciation recapture. But I want to make sure I'm calculating this correctly before I put it on the market next month.

This thread has been incredibly helpful! I'm currently going through a similar situation with a triplex I bought in 2018. One thing I want to add that might help others - make sure you're keeping detailed records of any capital improvements you made during ownership, as these can actually reduce your depreciation recapture amount. For example, if you replaced the roof, upgraded electrical systems, or made other substantial improvements that extend the property's useful life, these costs get added to your basis and aren't subject to the 25% recapture rate. Only the depreciation on the original structure and components gets hit with that rate. I learned this the hard way when I initially calculated my potential tax liability without accounting for about $35,000 in improvements I'd made over the years. Those improvements reduced my recapture by quite a bit! Just wanted to mention this since Emma's situation might benefit from reviewing any major improvements made to that 4-unit building.

Just be careful with the depreciation calculations if the property was already being depreciated before it went into the trust. When I inherited a rental through a trust, I messed up by starting depreciation from the full value again instead of continuing the existing depreciation schedule. Also, keep in mind that when you transfer property from a trust to a beneficiary, it's generally not considered a sale, so there's no "step-up" in basis. Your husband will continue the same depreciation schedule that the trust was using, not start over with the current market value.

Great question about trust taxation! I went through something very similar when my grandmother's trust had rental income before we could transfer the property. You're on the right track with your thinking. Yes, you can absolutely deduct all those legitimate rental expenses on the 1041 - depreciation, utilities, maintenance, and the attorney fees for the property transfer are all deductible. The attorney fees would go under administrative expenses since they relate to trust administration. If your deductions bring the trust income below $600, you're technically not required to file a 1041. However, I'd strongly recommend filing anyway, especially since you're dealing with a property transfer. It creates a clean paper trail and properly documents the trust's final activities. Regarding adding the income to your personal return instead - unfortunately, that's not how trust taxation works. The trust is a separate tax entity, so the income it earned while it owned the property must be reported on a 1041. Your husband will receive a K-1 showing his share (100% as sole beneficiary), and that flows to your joint return. One thing to consider: make sure you're handling the depreciation correctly during the transition period. The trust can claim depreciation for the months it owned the property, then your husband continues the depreciation schedule (with the same basis) after the transfer. Filing a final 1041 marked as "Final Return" will officially close out the trust's tax obligations. It's worth doing it right to avoid any future complications!

5 Does anyone know if I need a business license for reselling clothes online? I'm making about $500/month now and getting worried I'm missing something important tax-wise.

Great question! For someone just starting out with reselling, I'd recommend keeping it simple at first. Start tracking all your expenses immediately - even basic things like shipping supplies, postage, and any fees from selling platforms. Use a simple spreadsheet or even just save all your receipts in a folder. The home office deduction is tricky for most resellers because you need a space used EXCLUSIVELY for business. Your bedroom doesn't count if you also sleep there. However, you can still deduct legitimate business expenses like packaging materials, shipping costs, selling platform fees, and mileage for post office trips. Since you're making $200-300/month, you're definitely over the threshold where you need to report this income on your taxes (Schedule C). The good news is that proper record-keeping of expenses can significantly reduce the amount of tax you'll owe on that income. Start now and you'll thank yourself come tax season!

This is exactly the kind of confusion that trips up so many small business owners! You're absolutely right that as a sole proprietor LLC filing Schedule C, you most likely don't have an applicable financial statement under IRS definitions. I went through this same issue last year with some photography equipment purchases. What really helped me was creating a simple spreadsheet to track all my options: 1) **Regular depreciation** - 5 years for computer equipment 2) **Section 179 expensing** - Full deduction in year of purchase (up to $1.16M limit for 2024) 3) **Bonus depreciation** - Currently 60% in 2024, then 40% in 2025 For your $3,200 items, Section 179 is probably your best bet since you can expense the full amount immediately. Just make sure you're using the equipment primarily for business (over 50% business use) and that you place it in service during the tax year you want to claim the deduction. One thing that caught me off guard - make sure you have that written de minimis policy in place by the beginning of your tax year if you want to use any safe harbor elections going forward. Even though it won't help with your current purchases, it's good to have documented for future years.

The applicable financial statement (AFS) requirements really are a major hurdle for small businesses like yours. As others have mentioned, you likely don't qualify for the $5,000 threshold since sole proprietors typically don't have audited financials or SEC filings. However, I'd suggest looking beyond just Section 179 and bonus depreciation. Have you considered whether your equipment might qualify for the Research & Development credit if you're using it for developing new products or processes? Also, if any of your equipment has dual-use capabilities (like a workstation that can also function as a server), you might want to document the business percentage carefully. One practical tip: start a detailed usage log now for all your equipment. Track business vs personal use for at least 90 days to establish a clear pattern. This documentation will be invaluable if you're ever audited, regardless of which depreciation method you choose. The IRS loves detailed contemporaneous records, and it can make the difference between having your deductions accepted or challenged. For next year, definitely implement that written de minimis policy that others mentioned - it needs to be in place at the beginning of the tax year to be valid.