What an absolutely fantastic thread this has been! As someone who's been working in payroll for over a decade, I can't tell you how often I get panicked calls from employees asking me to "fix their withholdings" because they're terrified a bonus or raise will somehow cost them money. The misinformation around tax brackets is so pervasive that I've actually started including a brief explanation in our company's benefits orientation. I show new hires a simple example: if you earn $50,000 and get a $1,000 raise that pushes part of your income into the next bracket, maybe $200 of that raise gets taxed at 22% instead of 12%. That means you pay an extra $20 in taxes but keep an additional $980 - you're still way ahead! @Anastasia Kozlov - please take that raise with complete confidence! The fact that you asked this question shows you're being thoughtful about your finances, which is admirable. But rest assured, our tax system is specifically designed so that earning more always means keeping more, even after taxes. The progressive marginal structure exists precisely to prevent the scenario you were worried about. This thread should honestly be pinned as a resource - the combination of clear explanations, real-world examples, and professional insights here is exactly what people need to overcome this widespread misconception!

This entire thread has been absolutely phenomenal! As someone who's been quietly struggling with this exact same fear about tax brackets, reading through everyone's explanations has been like having a lightbulb moment. What really drives it home for me is seeing how many different people - from tax professionals to payroll workers to folks who've lived through this confusion themselves - are all saying the exact same thing: you literally cannot lose money by earning more due to tax brackets. The marginal system makes it mathematically impossible. I particularly love all the analogies everyone has shared - the buckets, the staircase, the economic logic of why the system HAS to work this way. It's amazing how something that seemed so scary and complicated becomes crystal clear once you understand that only the dollars ABOVE each threshold get taxed at the higher rate. @Anastasia Kozlov - you should feel so proud for asking this question! Not only are you going to take that raise with complete confidence now, but you've created this incredible educational resource that's going to help so many people. I'm already planning to share some of these explanations with friends who I know have the same worries. Thank you to everyone who took the time to share their knowledge and experiences. This is exactly the kind of community discussion that makes a real difference in people's lives and financial decisions!

For what it's worth, I itemized deductions as a dependent last year and it was definitely worth it in my case. Had about $14,000 in medical expenses after a major surgery (which easily cleared the 7.5% AGI threshold) plus some charitable donations. The key thing I learned is that you need to be the one who actually paid the expenses if you want to claim them. So I made sure to pay my medical bills directly from my account rather than having my parents pay them, even though they offered. Made documentation much cleaner for tax purposes.

Katherine, you're definitely on the right track asking about this! As a dependent, you can absolutely file your own return and itemize deductions if it benefits you. Looking at your specific situation: Your $2,800 in medical expenses could be partially deductible since they need to exceed 7.5% of your $18,500 AGI (so about $1,388). That means roughly $1,412 of your medical bills would qualify. Your $500 charitable donation to the university is fully deductible since you made it with your own money. However, those job expenses related to your internship likely aren't deductible anymore due to tax law changes in 2018 - unreimbursed employee expenses were eliminated for most people. So you'd potentially have around $1,912 in itemized deductions ($1,412 medical + $500 charitable). As a dependent, your standard deduction would be $18,900 (your earned income plus $400, but capped at the regular standard deduction). In your case, itemizing probably wouldn't be worth it since your itemized amount is much lower than the standard deduction. The good news is you can still claim these on your own return - they don't go to your parents just because you're a dependent. Just make sure you have good documentation showing you personally paid these expenses!

Just wanted to add something important about Schedule K line 19a that hasn't been mentioned yet - make sure you're filling out line 19a on the Schedule K, but ALSO completing the corresponding line items for each partner on their Schedule K-1 (in Section 19, codes A and B). I made this mistake last year and it caused confusion with one of our partners who couldn't reconcile their personal tax records with their K-1. The Schedule K line 19a is the total distributions for all partners combined, while the K-1s break down each partner's individual portion.

One thing to be careful about with Schedule K line 19a - if your distributions exceed a partner's basis, that excess could be taxable! This happens when partners take out more money than they've invested plus their share of undistributed profits. We learned this the hard way when our LLC distributed cash from a refinance. Watch your basis calculations carefully.

Thanks everyone for the incredibly detailed responses! This has been exactly what I needed. Based on all the feedback, it sounds like the Section 754 election is definitely available in our debt assumption scenario, which is a relief. A few follow-up questions based on the discussion: 1. @Paolo Marino - when you mention "properly documenting the debt assumption," are there specific forms or statements that need to be attached to the partnership return beyond the standard Section 754 election statement? 2. @Isabella Oliveira - we do have some Section 704(c) built-in gain from contributed property. Do you have any recommendations for resources that walk through the interaction between 704(c) and 743(b) adjustments? This seems like where I might need to bring in additional expertise. 3. @Ravi Patel - great point on Section 755. Our partnership has both depreciable real estate and some intangible assets. Is there a standard methodology for determining fair market values for the allocation, or does this typically require formal appraisals? This community has been incredibly helpful - I feel much more confident about moving forward with the election now. Really appreciate everyone taking the time to share their experiences!

Great discussion everyone! As someone who's dealt with several partnership transfers involving debt assumptions, I wanted to add a practical tip that might help @StardustSeeker and others in similar situations. One thing I've learned is to pay close attention to the partnership agreement's provisions regarding transfers and debt assumptions. Sometimes there are specific clauses that can affect how the Section 754 election is calculated, especially if the agreement has special allocation provisions or restrictions on transfer rights. Also, regarding the timing that @Amara Oluwaseyi mentioned - it's worth noting that once you make a Section 754 election, it generally applies to all future transfers unless you get IRS permission to revoke it. So make sure you're comfortable with the ongoing compliance burden, as you'll need to make basis adjustments for all subsequent partnership interest transfers. The interaction between debt assumption and the election is definitely well-established in the regulations, so you're on solid ground there. Just make sure your documentation clearly shows the connection between the debt being assumed and the partnership interest being transferred. Good luck with your transaction!

I had this same issue and found that Credit Karma (now Cash App Taxes) lets you file multiple state returns for FREE. The interface isn't as nice as TurboTax but saved me hundreds last year. But honestly you should double check the minimum filing requirements - I only ended up needing to file in 6 states out of the 15 I worked in because most had minimum income thresholds I didn't meet.

As someone who works in tax preparation, I can confirm what others have said about minimum filing thresholds - this is crucial for touring musicians! Here's a quick reality check: many states have thresholds ranging from $600 to $3,000 before you're required to file. Some key ones for touring acts: Texas has no state income tax, Florida has no state income tax, Nevada has no state income tax, so you're already down to 20 potential states right there. For the states where you do need to file, I'd strongly recommend against the "ignore small amounts" advice - while enforcement is rare, you don't want surprise bills with penalties years later. The better approach is to use the minimum threshold rules properly. One thing I haven't seen mentioned: if your wife received W-2s from venues (rather than 1099s), some states have different rules for employees vs. independent contractors. W-2 income often has different thresholds or may be exempt under reciprocity agreements with your home state. Before paying for expensive software, spend an hour researching each state's actual requirements. You might find you only need to file in 8-10 states instead of all 23.