One more thing to consider - the timing of when you discovered the damage vs when it actually occurred can matter for which tax year you claim it in. If you discovered all this damage in early 2023 even though it happened in late 2022, you might have the option of which year to claim it in.

I went through a very similar situation with tenant vandalism in 2021, and I can share some specific insights about the Form 4684 process that might help you. First, your approach is mostly correct - you'll need to file an amended return for 2022 since that's when the damage occurred. The key is properly documenting the "before and after" fair market value, which you can do even with partial repairs completed. For the fair market value calculation, the IRS accepts what's called the "cost to repair" method when you can't get a formal appraisal. Since you have $16k in documented materials costs, multiply this by 2.5-3 to estimate total repair costs (including labor). This gives you a reasonable estimate of value reduction that the IRS will accept if properly documented. Make sure you're also accounting for lost rental income during the repair period - this can be claimed as additional casualty loss if you can show the property was uninhabitable and you lost actual rental income. One critical point: save all your "before" photos and get a written statement from that appraiser you mentioned, even if it's just a brief email confirming the damage would have made the property unmarketable. The IRS loves contemporaneous documentation. Also, since you mentioned the tenant was arrested, try to get a copy of any police reports or court documents that reference the property damage - this strengthens your case that it was vandalism rather than normal wear and tear. Your estimated 25% value reduction seems reasonable given the scope of damage you described. With proper documentation, this should be a solid casualty loss claim.

Anyone else notice that the IRS interest rate for underpayment keeps going up? I swear it was like 5% a couple years ago during covid, and now it's closer to 8%. Makes a huge difference when calculating these penalties on large underpayments.

The underpayment penalty calculation can definitely be confusing! To clarify what others have mentioned - it's not a flat 5% hit on your total underpayment. The IRS uses a quarterly system where they calculate how much you should have paid each quarter (based on either 25% of this year's liability or the safe harbor amounts), then charge interest on any shortfall from each quarterly due date until paid. For your $135k situation, the actual penalty depends on when during the year you fell short. If most of that underpayment was due to Q4 capital gains, your penalty might be much lower than if you were short all year. The current rate is around 8% annually (about 2% per quarter). One important thing to check - if your AGI last year was under $150k, you only need to pay 100% of last year's tax to avoid penalties, not 110%. That could make a big difference in whether you actually owe any penalty at all!

One thing nobody's mentioned is that you could try a middle-ground approach. Use TurboTax or H&R Block to prepare everything yourself first, then take it to a professional for review. Many CPAs offer a "review service" that costs less than full preparation. This gives you the best of both worlds - you learn how to use the software and understand your tax situation better, but also get professional eyes on it to catch mistakes or missed opportunities. I did this last year and paid $125 for the review instead of $350 for full preparation. If your situation gets simpler next year, you'll have learned enough to possibly handle it yourself with confidence.

Given your complex situation, I'd lean toward a tax professional this year, but I understand the cost concern. Here's what I'd consider in your shoes: Your situation has several red flags that could trigger IRS scrutiny if not handled properly - the severance package, retirement distributions, unemployment benefits, and significant stock transactions all need careful reporting. One alternative approach: consider reaching out to an Enrolled Agent (EA) instead of a CPA. EAs specialize specifically in tax matters and often charge less than CPAs while being just as qualified for tax preparation. They're authorized to represent you before the IRS if any issues arise later. For the house ownership question - this is actually a big deal that could save or cost you hundreds. The software will ask basic questions but won't analyze your specific financial situation to determine the optimal strategy like a professional would. If budget is tight, you could also look into VITA (Volunteer Income Tax Assistance) programs if your income qualifies, or see if any local tax professionals offer payment plans. Given all the moving parts in your 2024 taxes, the peace of mind and potential savings from proper handling probably outweigh the extra cost this year.

Has anyone considered the fact that waiting just ONE MONTH would save potentially tens of thousands in taxes? I mean, I get the builder incentives might be good, but are they $15-20k good? Seems crazy to rush into a potentially big tax bill for a slightly better interest rate.

You might want to check if your move qualifies for a partial exclusion under the "unforeseen circumstances" provision. The IRS allows partial exclusions for moves related to health, employment changes, or other qualifying unforeseen circumstances. Moving closer to your kids could potentially qualify if it's for caregiving purposes or other family-related reasons that meet the IRS criteria. Even if you don't qualify for any partial exclusion, remember that you can add your selling costs (realtor commission, title fees, etc.) directly to your cost basis to reduce the capital gain. On a $415k sale with typical 6% realtor fees, that's about $25k in selling costs that reduce your taxable gain. Also, don't forget to include any capital improvements you've made since 2021 - new appliances, flooring, HVAC work, etc. These all increase your basis and reduce your gain. Keep all your receipts organized. Given the potential tax savings of waiting one more month versus the builder incentives, I'd run the actual numbers on both scenarios. Sometimes those builder rate buydowns are worth more than the tax hit, especially if you're planning to stay in the new home long-term.

Has anyone successfully appealed an IRS denial for casualty loss due to no insurance? My CPA said we should just give up but I'm wondering if it's worth fighting.

Carmen, I'm really sorry to hear about your situation with the Fort Myers property. One thing that might help is checking if you have any documentation showing you attempted to get insurance or were quoted unreasonably high premiums. Based on what others have shared here, the IRS sometimes accepts appeals when you can prove insurance was genuinely unavailable or prohibitively expensive. Also, since this was Hurricane Michael, you might want to double-check the timeline - that hurricane hit in 2018, so depending on when you filed your taxes, there might be amended return options still available. The casualty loss rules have changed several times in recent years, and you might have more options than your initial denial suggested. Have you considered reaching out to a tax attorney who specializes in disaster-related tax issues? Sometimes the appeal process requires very specific documentation and legal arguments that general tax preparers aren't familiar with. Given the significant financial impact you mentioned, it might be worth the investment to get professional help with the appeal.