I learned this the hard way - the IRS hit me with an audit because I had 5 straight years of rental losses. My tax software didn't warn me about the "not-for-profit" rules at all! Is TurboTax or HR Block any better at flagging this issue?

One important thing to add to this discussion - the "not-for-profit" determination isn't just about your rental income and expenses. The IRS also looks at how you operate the property and whether you're making business-like decisions to improve profitability. For example, if you're consistently renting below market rate without good reason, that could hurt your case. Same if you're not actively marketing for tenants when the property is vacant, or if you're not making necessary repairs that would allow you to charge higher rent. Since you mentioned you inherited this property and are running at a loss, make sure you can document any efforts you've made to improve the situation - raising rents to market levels, improving the property to attract better tenants, consulting with local property managers about optimal pricing, etc. The IRS wants to see that you're actively trying to turn things around, not just passively collecting whatever rent comes in while claiming losses year after year. Also, inheritance situations can actually work in your favor sometimes because you have a legitimate reason for initially operating at a loss (paying inheritance taxes, bringing the property up to rental standards, learning the business), as long as you can show you're working toward profitability.

I'm reading all these comments and feel like I'm taking crazy pills. Our entire government is in chaos and everyone's just like "keep paying your taxes, nothing to see here!" WTF? Not saying anyone should commit tax fraud, but maybe consider adjusting your withholdings to the legal minimum while keeping good records of what you would normally pay? Then if things stabilize you can make estimated payments to catch up without penalties?

I understand the confusion, but I want to emphasize what others have said - continuing to pay your taxes is absolutely the right approach. I've been through several IRS reorganizations during my career, and the core tax collection and enforcement systems always remain operational. What many people don't realize is that the IRS processes over 150 million individual tax returns annually through highly automated systems. These computer systems that match your reported income to what employers and banks report to the IRS don't get shut down during administrative changes. If you're genuinely concerned about where your tax dollars are going during this transition, you can actually track federal spending through USAspending.gov. Your tax payments continue funding Social Security, Medicare, military operations, infrastructure maintenance, and other essential services that operate continuously regardless of IRS staffing changes. The best thing you can do is maintain accurate records, file electronically if possible to avoid paper processing delays, and continue making your regular tax payments. If you have specific concerns about your tax situation, consider consulting with a licensed tax professional who can give you personalized advice based on your circumstances rather than making decisions based on general uncertainty about government operations.

Anyone know if property management fees count toward the "services" that might trigger self employment tax? I own the properties but pay a company to handle everything.

This is exactly the kind of confusion that trips up so many rental property owners! You're smart to think through the implications before diving in. The key thing to understand is that the QBI deduction and self-employment tax operate under completely different rules. The IRS specifically designed the rental real estate safe harbor (Rev. Proc. 2019-38) to allow rental properties to qualify for QBI while maintaining their status as passive investments for SE tax purposes. Think of it this way: QBI asks "is this a business activity?" while SE tax asks "are you actively engaged in a trade or business?" For rentals, the answer can be yes to the first and no to the second. As long as you're doing normal landlord stuff - collecting rent, arranging maintenance, screening tenants, handling lease agreements - you're still in passive income territory. The line gets crossed when you start providing substantial personal services to tenants (like daily housekeeping, meals, or concierge services that would make it more like running a hotel). So you can absolutely pursue that QBI deduction without worrying about suddenly owing SE taxes on your rental income. Just make sure you meet the safe harbor requirements if you go that route.

anybody know if AOTC is better than the Lifetime Learning Credit? my tax guy said AOTC is usually better but depends on your situation

Just wanted to add a few key points that might help others in similar situations: 1. The AOTC requires you to be enrolled at least half-time in a degree program, while the Tuition and Fees Deduction doesn't have this requirement. 2. If you receive a refund from your school for any reason (dropped classes, etc.), you need to reduce your qualified expenses by that amount or potentially pay back part of the credit. 3. Keep ALL your receipts and documentation - not just the 1098-T. The IRS can audit education credits, and you'll need proof of what you actually paid and when. 4. If you're planning to continue school beyond 4 years total (including any previous colleges), start thinking about whether to save some AOTC eligibility for later years when your expenses might be higher. With your income level and being in year 3, the AOTC is definitely your best bet. Just make sure you're tracking everything properly for future years!

Does anyone know if you need to keep any special documentation when renting to family below market value? My tax person said I should have some kind of formal rental agreement even though its my dad renting from me.

I'm dealing with a very similar situation - renting to my elderly parents below market rate. One thing I learned from my CPA is that you should also document WHY you're charging below market rent. In my case, I kept records showing that my parents help with property maintenance and yard work, which justifies some of the rent reduction. Also, make sure you're treating this like a real business relationship even though it's family. I set up automatic bank transfers for the rent payments so there's a clear paper trail, and I give my parents a receipt each month. The IRS wants to see that this is a legitimate rental arrangement, not just you letting family live there cheaply. One more tip - if your mother-in-law ever stays elsewhere for extended periods, keep track of those days. If the property is vacant for more than 14 days per year due to personal use (like if she visits other family), it affects your tax calculations even more.