Something nobody mentioned yet - if you're not claiming the child as a dependent this year, make sure you check the box in TurboTax that says "Someone else can claim this dependent" when you enter their information. That way the software knows not to claim them on your return even though you're providing their info.

Just wanted to add my experience with this same situation! I have a similar 50/50 custody arrangement with my ex-husband, and we alternate years claiming our son. What I learned from my tax preparer is that you should definitely put 12 months since your daughter lives with you part of every single month. The key thing to remember is that even though you're not claiming her as a dependent this year, answering the "months lived with you" question correctly is still important for other potential tax benefits you might qualify for, like Head of Household filing status if you're eligible. Also, make sure you and your ex both keep good records of your custody arrangement. I keep a simple calendar noting which days our son is with each parent, just in case the IRS ever has questions. It's never been an issue, but it gives me peace of mind knowing I can document our 50/50 split if needed.

Has anyone considered the rules around "step transaction doctrine"? I've heard the IRS can sometimes claim that direct gifts into an IRA could be viewed as trying to exceed contribution limits if done incorrectly. Would it be safer to just give the money to the grandchild's regular account first?

This is such a thoughtful gift! I went through something similar when helping my adult son with his IRA contributions. The key thing to remember is that the IRS looks at two separate things: 1) whether your grandson has enough earned income to support the contribution (which he clearly does at $85K), and 2) whether the contribution stays within the annual limits. Since money is fungible, it doesn't matter that the $7,000 comes from you rather than his paycheck. Once you gift it to him, it becomes his money to contribute. The IRS won't trace the source of funds in his IRA account. One thing I'd add to what others have mentioned - make sure to keep good records of the gift for your own tax purposes, even though it's well under the annual exclusion limit. It's just good practice to document larger gifts in case there are ever questions down the road. Your grandson is lucky to have someone thinking ahead about his retirement savings at such a young age!

Does anyone know how this works for older children? My son is 16 and he's gotten a job, plus has some investment income from his UTMA. Does having earned income change anything about using UTMA funds to pay the investment taxes?

This is a great question that comes up more often than you'd think! As others have mentioned, you absolutely can withdraw from your daughter's UTMA account to pay taxes that were generated by the account's earnings. This is considered a legitimate expense for the minor's benefit. One thing I'd add is to make sure you're calculating the tax correctly for a 13-month-old. Since she has no earned income, all of her investment income will be subject to the kiddie tax rules. For 2024, the first $1,300 is tax-free, the next $1,300 is taxed at her rate (likely 10%), and anything over $2,600 gets taxed at your marginal rate. With $4,500 in taxes owed, it sounds like she had some substantial gains! Just double-check that you're not overpaying - sometimes people forget about the standard deduction for unearned income or miscalculate which bracket applies to which portion of the gains. When you make the withdrawal, definitely keep documentation showing it was used specifically for her tax obligation. Most custodial account providers are familiar with these types of withdrawals and shouldn't give you any trouble.

Just a heads up that while these expenses are deductible, you can only benefit if you itemize deductions on Schedule A rather than taking the standard deduction. With the standard deduction being $13,850 for single filers in 2023, make sure your total itemized deductions (including mortgage interest, state/local taxes up to $10k, charitable contributions, AND these impairment-related expenses) exceed that amount. Otherwise, you won't see any tax benefit from these work expenses.

Random question - has anyone tried getting reimbursed through health insurance for ergonomic equipment? My doc wrote me a prescription for an ergonomic chair and my HSA covered it! Might be worth looking into before going the tax deduction route.

Has anyone used the cost basis feature in H&R Block? TurboTax was giving me errors when I tried to enter some of my stock transactions that had wash sales. Wondering if another software might handle it better.

Just wanted to chime in with some additional perspective on the software discussion. I've used both TurboTax and H&R Block for capital gains reporting over the years, and honestly both have their strengths and weaknesses. One thing I learned the hard way is to always double-check that your software is properly handling wash sale adjustments. I had a situation where I sold stock at a loss and bought similar shares within 30 days, creating a wash sale. The software I was using at the time didn't catch it automatically, and I ended up having to file an amended return when I realized the mistake. Also, if you're dealing with a lot of transactions, consider getting the physical forms (Schedule D and Form 8949) and doing a few by hand first to understand the process. It helped me catch errors in my tax software and gave me confidence that everything was being calculated correctly. The IRS website has good examples of how to fill these out properly.