One thing nobody mentioned yet - the cost basis of your house will change after depreciation! Make sure your accountant tracks this carefully. Let's say you bought for $400k and took $30k in depreciation during rental years. Your adjusted basis becomes $370k, which affects your capital gain calculation when you sell. Example: Sell for $600k after taking $30k depreciation - Gain: $600k - $370k = $230k - Apply $500k exclusion: $0 taxable gain - BUT still owe 25% tax on $30k recaptured depreciation This catches so many people by surprise at tax time!

Just be careful with the timing! The 2-out-of-5 years test is extremely strict. If you're off by even a few days, you could lose the entire $500k exclusion. I'd recommend selling a month BEFORE your deadline to be safe. Also, keep AMAZING records of when you moved out and when the property became a rental. Save utility bills, moving receipts, rental agreements, etc. The IRS loves to challenge primary residence claims.

Quick heads up - I just went through this process with my new law practice. If you're doing a mega backdoor Roth with an S Corp, be VERY careful about the timing of your salary payments. The employer contribution limits for solo 401(k)s are based on your W-2 wages from the S Corp. If you want to max out your contributions for 2025, you need to pay yourself enough salary THIS calendar year to support those contribution limits. I messed this up my first year - paid myself mostly in December and couldn't make the full employer contribution I wanted because my W-2 wages weren't high enough for most of the year.

This is such a timely question! I'm in a similar boat - launching my freelance design business next month as an S Corp and have been wrestling with the same retirement optimization challenges. One thing I've discovered that might help is looking into Charles Schwab's Individual 401(k). While their basic plan doesn't include after-tax contributions, they do offer what they call an "Enhanced Individual 401(k)" that can be customized with additional features including after-tax contributions and in-service distributions for the mega backdoor strategy. The setup fee is around $500 and there's a small annual maintenance fee, but it's significantly less expensive than some of the fully self-administered options while still giving you the flexibility you need. I spoke with one of their retirement specialists last week and they confirmed that SECURE 2.0 provisions are gradually being rolled out, but the core mega backdoor functionality has been available for a while. Also worth noting - make sure you're factoring in the administrative burden of managing all this yourself. Between tracking contribution limits, coordinating rollovers, and staying compliant with testing requirements, it can get complex quickly. Sometimes paying a bit more for a provider that handles the heavy lifting is worth it, especially in your first year when you're focused on building the business.

Just wanted to add my experience for anyone still on the fence about FreeTaxUSA vs TurboTax for wash sales. I had about $12k in wash sales last year and was initially panicking about using FreeTaxUSA. After reading through all the advice here, I checked my Schwab 1099-B forms and sure enough, Box 1g was checked on all of them. The adjusted basis in Box 1e already included the wash sale adjustments. I entered the numbers exactly as shown into FreeTaxUSA and filed without any issues. The IRS accepted my return with no questions, and I saved $79 compared to TurboTax. The "missing functionality" really isn't missing at all - it's just that FreeTaxUSA expects your broker to have done the wash sale calculations correctly (which they almost always do for major brokerages). My advice: Check Box 1g on your 1099-B first. If it's checked, FreeTaxUSA will work just fine. If for some reason your broker hasn't adjusted for wash sales (which would be unusual), then you might need to consider other options or do manual calculations.

This thread has been incredibly helpful! I've been stressing about the exact same issue with FreeTaxUSA and wash sales. I have around $7k in wash sales from some unfortunate day trading attempts last year and was convinced I needed to upgrade to TurboTax or find special software. After reading everyone's experiences, I checked my E*TRADE 1099-B forms and confirmed that Box 1g is checked on all of them. Looking more closely at the numbers, I can see that my adjusted basis amounts are indeed higher than my original purchase prices - exactly what you'd expect with wash sale adjustments already included. It's such a relief to know that FreeTaxUSA will handle this correctly as long as I enter the 1099-B numbers exactly as they appear. I was overthinking this whole process and nearly wasted money on more expensive software when the "functionality" I thought was missing is actually working exactly as it should. Thanks to everyone who shared their real-world experiences - this community discussion saved me both money and a lot of unnecessary anxiety!

I've been doing tax preparation for gig workers for 3 years, and meals are consistently misunderstood. Here's the simple rule I tell my clients: if you would have eaten the meal anyway (lunch, dinner, etc.), it's NOT deductible, even as a contractor. If it's a special meal specifically for business purposes (client meeting), it potentially is. The only exception is if you're traveling away from your tax home overnight - then meals during that travel period can be 50% deductible (or 100% if from restaurants under temporary provisions).

Your analysis is absolutely correct, and frankly, your professor's interpretation is concerning from a professional standards perspective. As someone who's dealt with numerous IRS audits involving meal deductions, I can tell you that the position your professor is advocating would not hold up under scrutiny. The "ordinary and necessary" test from Section 162 requires BOTH elements to be met. While eating might be "ordinary" for humans, personal meals during work hours are not "necessary" business expenses - they're personal living expenses that happen to occur during business hours. The IRS has consistently ruled that personal consumption expenses remain personal regardless of when they occur. If your professor's logic were correct, every employee could deduct lunch because "eating is necessary to work." The fact that someone is an independent contractor doesn't magically transform personal expenses into business deductions. I'd suggest your professor review Revenue Ruling 59-307 and the Tax Court case of Haft (T.C. Memo 1972-140), which specifically addressed similar meal deduction claims by delivery workers. The courts have been very clear on this issue. Your research methodology and conclusion demonstrate much better understanding of tax law than what your professor is teaching. Don't let credentials intimidate you when the law is clearly on your side.

Has anyone else noticed that like half the companies out there don't even know how to handle basic tax paperwork correctly? Last year I had three different clients mess up my 1099s even though I gave them properly completed W9s. One reported my income under the wrong tax ID, another used my old address, and the third just... never sent it at all. 🤦‍♀️

I've been freelancing for 3 years now and unfortunately this kind of confusion is pretty common. Many smaller companies don't have proper accounting departments and genuinely don't understand the W9 process. From what you've described, it sounds like you already provided them with your completed W9 when you started the contract work, and now you're just asking for a copy of that same form for your records. That's completely reasonable and they should provide it without requiring you to submit another blank form. Sometimes framing it differently helps - try saying "Could you please provide me with a copy of the W9 I submitted to you on [date]?" rather than just "I need a W9." This makes it clear you're asking for your own paperwork back, not requesting they fill out a new form. If they continue to be difficult, you might want to mention that you need it to ensure the 1099 they send you matches your records. Most companies want to avoid 1099 errors since those can create headaches for everyone involved.