Just wanted to add something about WHEN to take the deduction (or add to basis) that might help... If you decide not to buy the property after inspection, those travel expenses become immediately deductible as investment expenses (assuming you're looking at it as a potential investment property). But if you DO purchase, then like others said, those costs get added to your basis. Keep super detailed records either way.

Great question! I went through this exact situation last year when I bought my first rental property in another state. The key thing to understand is that your inspection travel expenses can't be deducted immediately as regular rental expenses since you don't own the property yet. Instead, these costs get added to your "cost basis" in the property - essentially increasing what you paid for it. So if you buy the property for $200,000 and spend $1,500 on inspection travel, your basis becomes $201,500. This reduces your taxable gain when you eventually sell. Make sure to keep detailed records of everything - flights, hotel, rental car, meals (though meals are only 50% deductible), and most importantly, document that the PRIMARY purpose was business inspection. I kept a detailed itinerary, took photos during the inspection, and saved all correspondence with the inspector. Once you own the property, future trips for maintenance, repairs, or tenant management would be fully deductible against your rental income. But this initial inspection trip is treated as an acquisition cost. Also worth noting - if for some reason you decide not to purchase after the inspection, those expenses generally can't be deducted at all under current tax law, so factor that risk into your decision-making.

This is such a valuable discussion! I'm dealing with this exact situation and appreciate everyone sharing their experiences. I have a portfolio of Treasury securities including some I-bonds, regular Treasury notes, and a few Treasury bills I bought at discount through my broker. What's been really helpful from reading through all these comments is understanding that the state tax exemption applies to ALL income from Treasury securities, not just the obvious interest payments. I was definitely confused about the market discount portion, and my tax software (TaxAct) seems to be including it on my state return incorrectly. One thing I'm curious about - do I-bonds follow the same rules? I know they have that inflation adjustment component, and I'm wondering if both the fixed rate and the inflation adjustment portions are exempt from state tax. Also, I've been deferring the tax on my I-bonds until redemption - when I eventually cash them in, should that entire amount (original purchase price plus all accrued interest) be excluded from my state return? It sounds like I need to do a comprehensive review of my state return to make sure I'm excluding everything I should be. The tip about adding up ALL Treasury income and ensuring the total exclusion matches is going to be really useful for my situation.

This thread has been incredibly helpful! I'm a tax professional who often gets questions about Treasury securities and state taxation, and I wanted to add a few practical points based on what I've seen in practice. First, you're all absolutely correct that both coupon interest AND market discount from US Treasuries should be exempt from state income tax. The constitutional protection against state taxation of federal obligations is comprehensive and covers all forms of income derived from these securities. However, I want to emphasize something that several people touched on - the biggest challenge isn't usually determining what should be exempt, but rather figuring out HOW to properly report the exemption on your specific state's forms. Each state handles this differently, and tax software often misses the market discount portion. A few additional tips from my experience: 1. **Documentation is key** - Keep detailed records of all your Treasury purchases, especially those bought at discount. You may need this if your state ever questions the exemption. 2. **Don't forget about mutual funds** - If you own Treasury-focused mutual funds or ETFs, the Treasury interest they pass through to you should also be exempt from state tax, but this often gets overlooked. 3. **Estimated taxes** - If you have significant Treasury holdings, make sure you're not overpaying estimated state taxes throughout the year. Many people forget to account for the exemption when calculating their quarterly payments. The tools mentioned here (taxr.ai for analysis and Claimyr for reaching state tax departments) sound like excellent resources for anyone dealing with complex Treasury income situations. When in doubt, it's always worth getting confirmation from your state tax authority rather than potentially overpaying.

Has anyone tried just having the second job withhold at the flat "supplemental wage" rate instead of using the tax tables? For my wife's second job (she makes about $125k total), her employer lets her choose to withhold at the flat 22% federal rate for supplemental wages and it's been working pretty well.

I went through this exact same situation a few years ago! The multiple jobs withholding issue is really common and honestly, the tax system isn't designed to handle it intuitively. One thing I'd add to the great advice already given - make sure you're also considering quarterly estimated tax payments as an option. If adjusting your W-4s feels overwhelming or if your side income varies significantly throughout the year, you can make quarterly payments directly to the IRS to cover the gap. I use the IRS Form 1040ES to calculate what I should pay quarterly for my consulting income. It's especially helpful if your side gig income fluctuates - some quarters I make more, some less, so I adjust my payments accordingly rather than trying to nail down exact withholding amounts. The IRS actually prefers to get money throughout the year rather than in one lump sum at tax time, so there's no penalty for overpaying via quarterly payments (you just get it back as a refund). Just another tool in your toolkit alongside fixing those W-4s!

One important thing no one mentioned yet - if you're expecting a significant income increase like your husband had, make sure you're looking at the safe harbor rules correctly. If your AGI is over $150,000, you need to pay 110% of your previous year's tax liability (not just 100%) to avoid penalties. Also, filing status matters here. Since you were both single last year and married this year, you'd need to calculate 110% of your COMBINED previous year tax liability. This is exactly why I use a CPA even though it costs more. They handle all this headache and help me sleep at night!

Just want to add something I learned the hard way - if you do end up owing a penalty for underpayment, make sure to use Form 2210 to calculate it yourself rather than waiting for the IRS to do it. Especially if you had uneven income during the year. The standard calculation assumes you earned income evenly throughout the year, which can result in a higher penalty if you earned more toward the end of the year. Form 2210 lets you show when you actually earned the income so the penalty is calculated fairly.

This thread has been incredibly helpful! I'm a tax preparer and have been wrestling with this exact Form 8960 Line 9b issue for several clients this season. The confusion between different tax software results has been driving me crazy. What I've found most valuable here is the confirmation that the SALT cap doesn't apply to the NIIT allocation calculation. I had been going back and forth on this interpretation, but the multiple IRS confirmations and the Treasury Regulation 1.1411-4(f)(3) citation really solidifies the correct approach. For other tax professionals reading this, I'd recommend documenting your calculation methodology clearly in your client files. I've started including a note explaining that we're using the full state tax amount (before SALT cap) multiplied by the investment income ratio, along with references to the Treasury Regulation and the legislative intent behind preventing double taxation. One thing I'd add for anyone doing this calculation - make sure you're using the correct total income figure from Form 1040 Line 15 (adjusted gross income), not modified AGI or any other income measure. I've seen some preparers accidentally use different income figures which throws off the entire ratio. The practical example with the $50K investment income and $200K total income was spot on - that 25% ratio multiplied by total state taxes gives you the proper Line 9b amount. Thanks everyone for sharing your research and experiences!

This entire discussion has been incredibly enlightening! As someone who's been preparing my own taxes for years but just hit the NIIT threshold for the first time, Form 8960 has been completely overwhelming. What really stands out to me is how this community came together to solve what initially seemed like a simple software discrepancy but turned out to be a genuinely complex tax interpretation issue. The fact that multiple people independently verified the same approach through different channels (IRS calls, CPA consultations, AI tools, etc.) really builds confidence in the methodology. I'm particularly grateful for the step-by-step example with actual numbers - seeing the $50K investment income divided by $200K total income to get the 25% ratio, then multiplying by the full $15K state tax amount to get $3,750 for Line 9b makes it crystal clear. That concrete illustration was worth more than reading the IRS instructions multiple times. The legislative context about preventing double taxation rather than creating additional deduction benefits also helps explain why the SALT cap doesn't apply here. It's one of those situations where understanding the "why" behind the rule makes the calculation method make much more sense. Thanks to everyone who shared their research and experiences - this is exactly the kind of practical tax guidance that makes navigating these complex forms possible for regular taxpayers like me!