I used to work in payroll and can confirm what others have said about CAFE 125. It's absolutely a good thing! One thing to watch for though - if you're contributing to Social Security, these deductions DO NOT reduce your Social Security wages, only your federal taxable wages. That's why your Box 3 (Social Security wages) might be higher than Box 1 (Federal taxable wages).

This is such a helpful thread! I'm dealing with the same confusion about CAFE 125 on my W2. One thing I'd add is that if you're ever unsure about how much you contributed to these pre-tax accounts during the year, most employers also include a breakdown in your final paystub of the year or in your benefits summary. It's really reassuring to know this is actually saving me money on taxes rather than costing me more. I was worried I had made some mistake during benefits enrollment, but sounds like these pre-tax deductions are actually one of the best tax benefits available to employees. Thanks everyone for the clear explanations!

My tax attorney suggested a completely different approach that might be worth considering. Instead of using an LLC or trust, he recommended my father do a "qualified personal residence trust" (QPRT) for exactly this scenario. Basically, my dad put the house in a QPRT for a fixed term (3 years in our case), during which he retained the right to live in it or rent it out. After the term expired, ownership automatically transferred to us kids, but the gift value for tax purposes was significantly discounted because of the retained interest.

Another consideration that might impact your decision is depreciation recapture. Since your father will be renting the property for 1-2 years before transferring it, he'll likely claim depreciation deductions on his tax returns during that period. When the property is eventually sold (regardless of whether it's held in an LLC or trust), any depreciation your father claimed will need to be "recaptured" and taxed at up to 25%. This applies to the entire depreciation amount he claimed, not just your portion. If your brothers plan to live in the house as their primary residence for at least 2 years before any sale, they might be able to exclude some of this recapture on their portions through the primary residence exclusion, but this gets complicated with mixed-use properties. You'll want to discuss with your attorney whether it makes sense for your father to forgo depreciation deductions during the rental period to avoid this issue, or if the current tax benefits outweigh the future recapture. This consideration applies regardless of the ownership structure you choose.

Regarding question 5 about the I-140 and Green Card: Having an approved I-140 petition alone does NOT make you a US person for tax purposes. The tax residency starts when you actually receive your Green Card (become a Lawful Permanent Resident). However, one thing to watch for - if you get your Green Card while living abroad and don't move to the US right away, you could potentially be considered a "resident alien" for tax purposes while physically living in Germany. This creates a complicated situation where both countries consider you their tax resident. There's a provision called the "first-year choice" that might help you in this situation, but timing matters a lot here.

For those discussing dual-status returns, there's an important limitation to be aware of: you cannot take the standard deduction on a dual-status return unless you're a resident of Canada, Mexico, South Korea, or India. You must itemize deductions for the resident portion of the year. Also, if you're filing dual-status because you left the US, you might want to look into any 401k or IRA accounts you have. There are special considerations for retirement accounts when you become a nonresident.

I'm dealing with something very similar right now - buying a property from a family friend's LLC at below market value. After reading through all these responses, I'm realizing this is way more complicated than I initially thought! From what I'm gathering, the key issues seem to be: 1. The LLC selling below market creates a potential gift tax situation for the owner personally 2. Mortgage lenders may have issues with the LLC structure vs individual gifts of equity 3. Documentation is absolutely critical - appraisals, business justifications, proper contracts I'm curious - for those who've been through this, did you end up structuring it as a straight sale from the LLC, or did your friend distribute the property to himself first and then sell it individually? And did anyone run into issues with their mortgage lender not accepting the arrangement? Also wondering if anyone has experience with how long the IRS gift tax reporting process takes if you do need to file Form 709. My friend is worried about potential delays or complications that might affect our closing timeline. Thanks for all the detailed responses - this thread has been incredibly helpful in understanding what we're getting into!

This is a really complex situation that touches on several areas of tax law. Based on what I've seen in practice, here are the key considerations: **Gift Tax Implications**: The LLC selling below market value will likely be treated as a gift from your friend (the LLC owner) to you for the difference. Since you mentioned a $58k discount and the annual gift exclusion is $17k per person ($34k for married couples), your friend would need to file Form 709 to report the excess against his lifetime exemption. **Documentation Requirements**: You'll absolutely need a professional appraisal to establish fair market value. This protects both of you and provides the documentation needed for tax reporting and mortgage approval. **Mortgage Lender Challenges**: Many lenders have strict guidelines about gifts of equity that assume individual-to-individual transfers. With an LLC involved, you may need to shop around for a lender willing to work with this structure. Be prepared for additional documentation requirements and potentially longer processing times. **Business Purpose**: Consider whether there are legitimate business reasons for the discount (quick sale, as-is condition, avoiding realtor fees, etc.) that could justify some portion of the reduced price. I'd strongly recommend your friend consult with both a tax professional and attorney before proceeding. The rules around related-party transactions through business entities can be tricky, and proper structuring upfront will save headaches later. Good luck with your purchase!

Quick suggestion - the IRS has an official Tax Withholding Estimator online that's actually pretty good: https://www.irs.gov/individuals/tax-withholding-estimator You enter both your incomes, current withholding from recent paystubs, and it gives you specific numbers to put on each W4. It's designed specifically for situations like yours with multiple jobs and disparate incomes. The calculator even lets you specify if you want a refund of a specific amount or if you want to break even. Might be worth trying before paying for any services!

Another option: just do estimated tax payments quarterly instead of messing with your W4s. That's what my wife and I do with our income disparity ($90K and $320K). We both just check "married" on our W4s without any adjustments, then make quarterly payments to cover the gap. The advantage is you can calculate it more precisely and adjust throughout the year as your income changes. Just use the 1040-ES worksheet to figure out how much to pay.