Just a heads up since I went through this recently - make sure your mom doesn't file her gift tax return (Form 709) herself unless she's really comfortable with tax forms. My dad tried to DIY it and actually reported the gift incorrectly which caused a whole mess. Either get a CPA or make sure you're using good tax software that handles gift tax returns. It's not super complicated but there are a few tricky sections that are easy to mess up.

Great question! I went through something similar with my parents a few years ago. One additional consideration that hasn't been mentioned much here is timing - you might want to think about whether your mom has any other major gifts or estate planning moves she's considering. If she's planning other significant gifts to family members, it might make sense to coordinate everything with an estate planning attorney to optimize the use of her lifetime exemption. Also, since you've been living in the house for 4 years already, you might want to consider if waiting until you meet the 2-out-of-5-years ownership/residency test could help with capital gains exclusions when you eventually sell (though that would require her to gift it to you soon so you can start the ownership clock ticking). The stepped-up basis vs carryover basis issue that others mentioned is really the biggest financial consideration here. Running the numbers on potential future sale scenarios might help you and your mom decide between gifting now versus inheritance later.

Did you check if you qualify for education credits? Since you mentioned you just got out of college, you might be eligible for the American Opportunity Credit or the Lifetime Learning Credit if you paid for educational expenses in the past year.

One thing that might help explain your situation is to look at your actual tax liability vs. what was withheld from your paychecks. With your total income of around $56,300 ($17,800 + $38,500), you're definitely in a higher tax bracket than what each individual employer was probably calculating when they withheld taxes. The multiple job issue that others mentioned is spot on - it's one of the most common reasons for smaller refunds or even owing money. Each employer's payroll system calculates withholding as if their job is your only income source, which can lead to significant under-withholding when combined. For next year, I'd definitely recommend using the IRS withholding calculator mid-year to check if you need to adjust your W-4. You might need to claim fewer allowances or request additional withholding on line 4(c) to avoid this surprise again. The $400 charitable donation will help a little, but it's relatively small compared to your total income. Also worth double-checking those education credits that Mohammed mentioned - if you paid any qualified education expenses this year, that could significantly boost your refund!

Here's a super simple way I calculated mine: Marginal rate: Look at the tax bracket where your last dollar of income falls. For married filing jointly in 2023, if your taxable income was between $89,451 and $190,750, your marginal rate is 22%. Effective rate: Line 24 (total tax) ÷ Line 9 (total income) × 100 = your percentage

Great question! As someone who also has both W-2 income and self-employment income, I can relate to the confusion around calculating these rates properly. Here's what I've learned from my own experience: **For Marginal Rate:** Find your taxable income on line 15 of your 1040, then look up which tax bracket that puts you in for married filing jointly. That bracket percentage is your marginal rate for federal income tax. But remember, any additional self-employment income will also be subject to the 15.3% self-employment tax (though you get to deduct half of it). **For Effective Rate:** This is where it gets tricky with self-employment income. You want to divide your total tax burden by your total income. So add up: - Line 24 (total tax from 1040) - Line 4 from Schedule 2 (self-employment tax) Then divide that sum by your total income (W-2 wages + net profit from Schedule C). One thing that really helped me understand this better was realizing that my effective rate tells me what I actually paid on average, while my marginal rate tells me what I'd pay on the next dollar I earn. This distinction is super important for planning whether to take on more consulting work! The self-employment tax piece definitely makes it more complex than just having W-2 income, but once you understand the components, it becomes much clearer.

Don't overthink this your first year. I did the same thing last year and spent WAY too much time analyzing options. A SEP-IRA is the simplest option to get started with - you can always switch to a Solo 401k next year if your business does well and you want to maximize contributions. For reference, here's what I contributed with around $85k in Schedule C income: - $15,800 to my SEP-IRA (about 20% of my profit after SE tax adjustment) - Still maxed my personal Roth IRA for additional tax diversity The huge advantage of starting with a SEP is you can set it up and fund it until your tax filing deadline including extensions. So you have until October 2026 to actually fund your 2025 SEP contribution if you extend your return.

As someone who just went through this exact decision process, I'd echo what others have said about starting with a SEP-IRA for simplicity. The "3 year rule" you mentioned definitely doesn't exist for SEP-IRAs - that might be something you saw related to defined benefit plans or other tax provisions. One thing I wish someone had told me earlier: don't forget that your SEP contribution is based on your net self-employment earnings AFTER the deduction for half of your self-employment tax. So if your Schedule C shows $50k profit, you'll actually be contributing 25% of something closer to $46k after that adjustment. Also, since you're filing Schedule C, make sure you're setting aside money for quarterly estimated taxes if you haven't already. The retirement contribution will help reduce your tax burden, but you'll still likely owe SE tax on your business income. Good luck with your first year as an entrepreneur!

Don't forget to keep REALLY good records of any medical expenses related to your wrongful termination - therapy, doctors visits, medication, etc. Those can potentially offset some of the taxable portion related to emotional distress. I made the mistake of not tracking all my expenses properly and probably missed out on some deductions. Learn from my fail!

I completely understand your anxiety about this - settlement taxes can feel overwhelming when you're already dealing with the stress of a legal battle. The good news is that you're asking the right questions early, which puts you ahead of many people. Here's what you need to know immediately: You'll likely receive either a 1099-MISC or possibly a W-2 (if the settlement is treated as back wages). The taxable amount is generally what you actually received, not the gross settlement before attorney fees. Since your lawyer took 33%, you'd typically pay taxes on your net amount (~$58,625), though recent tax law changes allow you to deduct attorney fees in many cases. For a settlement this size, you should absolutely make an estimated tax payment for Q1 2025 to avoid underpayment penalties. A rough estimate would be to set aside 25-30% of your net settlement for federal taxes, plus whatever your state rate is. The key is getting clarity on how your former employer will report this payment. Contact them or your attorney ASAP to understand whether they're treating it as wages, general damages, or a mix. This determines your tax treatment. Consider consulting with a tax professional who has settlement experience - the cost will likely save you much more than you spend, especially given the complexity and your anxiety about getting it right.