Has anyone used a 1031 exchange for land? I know it doesn't work for primary residences but maybe OP could buy another investment property instead and defer the taxes that way?

I went through something very similar last year when I sold inherited land to buy my first home. Unfortunately, as others have mentioned, there's no rollover provision for land sales into primary residence purchases - they're treated as completely separate transactions. One thing that really helped me was making sure I captured every possible expense that could be added to my basis. Beyond the obvious purchase price, I was able to include title insurance, legal fees from the original purchase, survey costs, and even some environmental testing I had done. I also found receipts for property tax payments during the holding period that I thought were lost. The key is documenting everything thoroughly. I ended up reducing my taxable gain by about $2,800 just by being more careful about what qualified as part of my cost basis. Even though you can't avoid the capital gains entirely, maximizing your basis can definitely minimize the tax hit. Good luck with both the sale and your new home purchase!

I've been reading through all these responses and wanted to add something that might be helpful - the IRS actually has a specific procedure for handling mixed personal/business transactions in S-Corps called the "loan vs. contribution analysis." What you're describing with treating personal expenses as additional paid-in capital and then netting that against personal withdrawals as a return of capital is actually a recognized approach, but you need to be very careful about the documentation. The key is establishing that these were intended as capital contributions at the time they occurred, not loans. This means you'll need to document that: 1. There was no expectation of repayment 2. No interest was charged or expected 3. The payments were made to benefit the corporation, not the individual 4. The shareholders had the intent to make capital contributions For your return of capital approach, make sure you can clearly show that the amounts withdrawn don't exceed your actual basis in the corporation. S-Corp shareholders can only receive tax-free return of capital up to their adjusted basis in the stock. One practical tip: create a shareholder basis schedule showing opening basis, plus contributions (including your personal expenses paid for business), plus/minus your share of income/losses, minus any distributions. This will help you determine how much can legitimately be treated as return of capital versus taxable distributions. The mixed personal/business situation isn't uncommon for small S-Corps, and the IRS has seen it all before. As long as you can demonstrate legitimate business purposes and maintain consistent treatment, your approach should be defensible.

Reading through all these responses, I want to emphasize something that might save you significant headaches down the road - the importance of establishing a clear paper trail NOW, even though these transactions already occurred. I've seen several small S-Corps get into trouble not because their approach was wrong, but because they couldn't adequately document their intentions when the IRS came asking. Here's what I'd recommend based on the discussion above: 1. Create a comprehensive transaction log showing every mixed personal/business expense with dates, amounts, business purpose, and supporting documentation. This becomes your evidence that personal expenses were legitimate business costs intended as capital contributions. 2. Draft a retroactive shareholder agreement acknowledging that personal funds used for business purposes were capital contributions, not loans. Include specific language about no expectation of repayment or interest. 3. Calculate your shareholder basis carefully (initial investment + additional contributions + allocated income - distributions) to ensure your return of capital treatment doesn't exceed your actual basis. 4. Most importantly - implement proper procedures going forward. Set up payroll for reasonable compensation, establish an accountable plan for expense reimbursements, and maintain clear separation of personal and business finances. The good news is that your situation isn't unusual for new S-Corps, and the approaches discussed in this thread are legitimate if properly documented. The bad news is that without proper documentation, even the correct tax treatment can be challenged successfully by the IRS. Consider getting a tax professional involved to review your documentation before filing - the cost now could save you much more in penalties and professional fees later if you face scrutiny.

Your friend was probably confusing dependents with tax exemptions, which used to be a thing before the 2018 tax law changes. Now dependents are very specifically defined and spouses never qualify.

Just to add another perspective here - I'm a tax preparer and see this confusion every year. Your buddy definitely meant well, but spouses can never be claimed as dependents, period. With your income situation ($190k vs $47k) and student loans, you're looking at a slam dunk case for married filing jointly. Here's why: 1. You'll get the full standard deduction for married filing jointly ($27,700 for 2023) 2. Your wife's income will be taxed at your marginal rates, but since there's a big gap between your incomes, this actually works in your favor 3. Most importantly - you keep that student loan interest deduction (up to $2,500) which disappears completely if you file separately 4. You'll likely qualify for other credits and deductions that get phased out or eliminated with separate filing The only time I ever recommend married filing separately is when one spouse has significant medical expenses or miscellaneous deductions, or when there are income-driven student loan repayment issues. With your numbers, filing jointly should save you several thousand dollars.

I totally get the confusion! I had the exact same panic moment when I first saw that negative number on Line 37. It really does seem backwards at first - like how can you "owe" a negative amount? But think of it like your bank account balance. When your account shows a positive balance, the bank owes YOU that money. When Line 37 shows negative, the IRS owes YOU that money as a refund. It's just accounting logic that can feel weird when you first encounter it. The good news is you're being super thorough by double-checking everything - that's exactly the right approach for your first time! And honestly, even experienced filers sometimes do a double-take when they see that negative sign. You're definitely not alone in finding the IRS instructions confusing either - they really could make things clearer for first-time filers. Sounds like you're doing everything right though! Keep up the careful work.

Hey Javier! As someone who also freaked out about this exact same thing on my first tax return, I can totally relate to your confusion. That negative number on Line 37 is absolutely correct when you're getting a refund! Here's the simple way to think about it: Line 37 is asking "how much do you owe the IRS?" When that number comes out negative, it's the form's way of saying "actually, you don't owe them anything - they owe YOU money instead." The negative sign is essentially flipping the direction of who owes whom. Instead of you owing the government money (positive number), the government owes you money (negative number). It's like the form is doing the math and saying "oops, we collected too much from you during the year, so here's your refund." You're being super smart by going slowly and checking everything multiple times - that's exactly what you should do! But you can breathe easy knowing that negative Line 37 + positive Line 34 refund = everything is working perfectly. The IRS forms really could be clearer about this stuff, so don't feel bad about being confused!

As someone who went through a similar situation last year, I'd recommend taking a collaborative approach rather than confrontational. Your HR person might genuinely be overwhelmed by the changes and defaulting to what she knows. Here's what worked for me: I printed out the IRS's "What's New" page that specifically explains the transition from allowances to the new system, along with my completed new W-4. I framed it as "I found this helpful explanation that shows why the new form will be more accurate for my family situation - would you mind taking a look?" The key was emphasizing that the new form would give us BOTH more confidence in the accuracy of my withholding. I also mentioned that I'd used the official IRS calculator to determine my numbers, which showed I was being responsible about getting it right. What really sealed the deal was when I showed her the side-by-side comparison of what my withholding would be with the old allowances system versus the new dollar-amount method for my specific situation (married filing jointly with kids claiming child tax credit). The difference was significant enough that she realized the old method would leave me either dramatically over or under-withheld. Since you have a personal relationship, you have an advantage - she's more likely to trust that you're not trying to make her job harder, just trying to get your taxes right. Good luck!

This is such a frustrating situation, but you're absolutely right to push for using the current form! I went through something similar at my company about a year ago. What really helped me was framing it around accuracy rather than compliance - I explained to our HR person that I was specifically trying to avoid getting a huge refund (like you mentioned getting too much back each year) and that the new form was designed to handle situations like mine much better. One thing that made a big difference was bringing a printout from the IRS website that showed the comparison between old and new withholding methods for someone in my exact situation. When she could see the actual dollar difference it would make in my paychecks versus my refund, she understood why it mattered. Since you have kids and are claiming child tax credits, the new form will definitely be more accurate for you. The old allowances system was terrible at handling tax credits properly. Maybe approach it by saying something like "I've been getting $X back in refunds each year, and I'd rather have that money in my paychecks. The new form is specifically designed to handle families like ours more accurately." Good luck with the conversation - the personal relationship should actually work in your favor once she realizes you're trying to make both your lives easier, not harder!