I had a similar situation and my accountant told me to keep track of "startup" activities vs ongoing business expenses. Apparently pre-opening costs have different rules than regular business expenses. You might want to check out IRS Publication 535 (Business Expenses) which talks about the difference. I think you can elect to amortize startup costs over 15 years or something like that.

The key distinction you need to understand is between startup costs and regular business expenses. Since you already have rental properties, this new property expansion might not qualify for the same startup cost treatment as someone just entering the rental business. For your $14,000 in repairs, you'll need to categorize each expense: 1. **Repairs that restore the property to working condition** (fixing plumbing, painting) - these can typically be deducted immediately once the property is placed in service 2. **Improvements that add value or extend useful life** (upgraded flooring, better water heater) - these must be depreciated over 27.5 years 3. **Costs incurred before the property was available for rent** - these might need special treatment The critical date is when you made the property "available for rent" - not when you found a tenant. If you completed repairs in November 2022 but didn't list it until January 2023, then January 2023 is likely your "placed in service" date. This means you'd claim the deductible expenses on your 2023 return, not 2022. However, if you can demonstrate the property was ready and you were actively seeking tenants in 2022 (even informally), you might be able to claim 2022 as the placed-in-service year. I'd recommend getting professional guidance since the timing affects not just which year you claim expenses, but also how they're treated under passive activity loss rules.

Can someone explain why my tax software is showing completely different numbers for the SALT cap in different sections? On one screen it shows I exceeded the cap by $8,235 but then in the summary section it says I'm under the cap. I'm so confused!

This is a great question that trips up a lot of people! The SALT deduction cap is one of the most confusing parts of the current tax code. Just to add some context to the excellent explanations already given - the reason you're seeing such a dramatic difference between 2024 and 2025 is likely because: 1. You mentioned buying a house in late 2024, so 2025 is your first full year of property tax payments 2. Property taxes can easily be $15k-25k+ annually depending on your location and home value 3. Combined with state income taxes, this quickly pushes you over the $10k cap One thing to keep in mind is that this SALT cap is currently set to expire after 2025, so it may not be a permanent limitation. However, nothing is guaranteed until Congress acts. Also, make sure you're not double-counting any property taxes that might have been prorated at closing - those should only be deducted once, in the year you actually paid them to the tax authority (not necessarily when they were due).

Great question about cell phone deductions! Just to add to the excellent advice already given - when you're calculating that 70% business use percentage, make sure you're being consistent across all your mixed-use items. The IRS likes to see that your methodology makes sense and that you're applying the same logic to similar expenses. One thing I learned the hard way is to document your business use percentage calculation method in writing and keep it with your tax records. Don't just estimate - write down something like "Based on tracking calls/texts for 3 weeks in March, approximately 70% of phone usage was for client communications and work-related activities." This kind of documentation can be invaluable if you ever get questioned. Also, since you mentioned you're doing contractor work, remember that you can deduct the business portion of your monthly phone bill too, not just the phone itself. If you're using 70% for business, that applies to your monthly service costs as well. These ongoing expenses can really add up over the year!

One thing I'd add to all this great advice - make sure you understand the difference between expensing and depreciating your phone. If it's under $2,500 (which most phones are), you can use the de minimis safe harbor rule and deduct the full business percentage in the year you purchase it. But if you go with a really expensive phone or bundle it with accessories that push the total over that threshold, you'll need to depreciate it over several years. Also, for your pre-business purchases like that monitor and keyboard - the fair market value when you start using them for business is key. You can't use the original purchase price if the items have depreciated. Look up what similar used items are selling for when you convert them to business use. This protects you if the IRS questions why you're claiming a deduction on something you bought months before starting your business. One last tip: set up a simple system now for tracking all this stuff going forward. Whether it's a spreadsheet, an app, or just a notebook, start documenting business use percentages and dates right away. It's so much easier than trying to reconstruct everything at tax time!

I've been selling Magic cards for about 5 years now, and the distinction between dealer and investor isn't always clear-cut. I maintain three separate categories: 1. Personal collection (never for sale, held 2+ years) 2. Long-term specs (purchased specifically as investments, held 1+ years) 3. Active inventory (regular buying/selling) For tax purposes, #1 and #2 qualify for collectible capital gains treatment when I occasionally sell, while #3 is ordinary income. The key is DOCUMENTATION. I track purchase date, price, condition, and intended purpose (collection, investment, or inventory) at the time of purchase. When audited two years ago, this system held up because I had consistent records showing clear intent and separate physical storage for each category. Without that paper trail, the IRS would have classified everything as dealer inventory.

This is such a helpful thread! I'm in a similar situation with sports cards and was completely confused about the tax implications. One thing I'd add based on my research is that the Section 1202 qualified small business stock exclusion might apply in certain situations if you incorporate your business properly, though it's pretty complex. Also, for anyone considering the business route, don't forget about quarterly estimated tax payments. Once you're making significant income from card sales, you'll need to pay estimated taxes throughout the year rather than waiting until April. I learned this the hard way and got hit with underpayment penalties my first year. The documentation advice from everyone here is spot on - I wish I had started tracking everything from the beginning instead of trying to recreate records later. Now I photograph every card I buy with the receipt and note my intent right in the filename.

Has anybody tried just printing and mailing their return instead of e-filing? After my second rejection I just said screw it and mailed everything in. No rejection possible that way!

Thanks for sharing this solution! I went through the exact same frustrating cycle of rejections last month. What made it even more confusing was that H&R Block's error message just said "incorrect AGI" without any mention that amendments could be the culprit. For anyone else dealing with this - another thing to watch out for is if you filed a superseding return (not just an amendment) the previous year. The IRS treats these differently than regular 1040-X amendments, and you might need the AGI from your very first filing, not the superseding return. Also, if you can't locate your original pre-amendment AGI, you can request a wage and income transcript from the IRS website (irs.gov) which will show exactly what they have on file for verification purposes. Way faster than calling and waiting on hold!