Just wanted to add some clarification on the MAGI calculation since I see some confusion in the comments. You're absolutely right that traditional IRA contributions don't reduce MAGI for determining deductibility - that would indeed be circular. However, it's worth noting that if you WERE eligible for the deduction (i.e., if your income was lower), THEN the traditional IRA contribution would reduce your MAGI for other tax purposes like determining eligibility for other credits or benefits. In your case at $93k post-401k, you're unfortunately well above the threshold. But here's a potential strategy: if you can increase your 401k contribution by even more (up to the $23,000 limit for 2025), that could potentially get your MAGI low enough to qualify for at least a partial traditional IRA deduction. For example, if you could contribute an additional $7k+ to your 401k, that would bring your MAGI down to around $86k or below, potentially making you eligible for the traditional IRA deduction. Of course, this only works if you have the cash flow to support the higher 401k contributions.

Great discussion here! Just to add one more perspective - I was in almost the exact same situation last year. Making around $105k, maxing out my 401k, and thinking I could squeeze out a traditional IRA deduction. What I learned the hard way is that once you're covered by a workplace plan, those income limits are pretty strict. At $93k MAGI after your 401k contributions, you're definitely above the $86k cutoff for any deduction. I ended up going the backdoor Roth route that several people mentioned. The process was actually simpler than I expected - contributed $6k to a traditional IRA (non-deductible), then immediately converted it to Roth. No taxes on the conversion since there were no earnings, and now that money grows tax-free. One thing to watch out for - make sure you don't have any other traditional IRA balances with pre-tax money, or you'll run into the pro-rata rule complications. If you do, consider rolling those into your current employer's 401k first if they allow it. The backdoor Roth has been a game changer for getting more money into tax-advantaged accounts at our income level. Definitely worth exploring!

I'm dealing with a similar situation and really appreciate everyone breaking down the math so clearly. The reality check about capital losses not helping with the 10% penalty is exactly what I needed to hear. One thing that might help others in this thread - I found that looking at my 401k statement online, there's usually a section that shows loan availability and terms specific to your plan. Mine shows I can borrow up to 50% of my vested balance at prime + 1% interest. The loan calculator even shows what the payroll deductions would be for different loan amounts and terms. What really convinced me to avoid early withdrawal was running the numbers: on a $15,000 withdrawal, I'd pay $1,500 in penalties plus income tax on $12,000 (after the $3,000 capital loss offset). In my 22% tax bracket, that's another $2,640 in taxes - so $4,140 total just to access my own money! Meanwhile, a $15,000 401k loan at 8.5% interest over 5 years would cost me about $3,800 in total interest payments, but that interest goes back into my own 401k account. So I'd essentially be paying myself back instead of throwing away $4,140 to the government. The choice seems pretty obvious when you put it that way! Thanks everyone for helping me avoid what would have been a very expensive mistake.

This thread has been incredibly educational! As someone who's been struggling with similar investment losses this year, I really appreciate everyone sharing their real experiences and doing the actual math. The key takeaway that keeps hitting me is how the 10% early withdrawal penalty is completely separate from capital loss benefits - they literally can't offset each other under tax law. Your capital losses can only help with up to $3,000 of ordinary income per year, while that penalty applies to the full withdrawal amount regardless. I'm particularly grateful for the folks who shared their 401k loan experiences. The idea of paying interest to yourself instead of throwing money away on penalties and taxes is brilliant. I just checked my plan's website and found I can borrow up to $25,000 at prime + 1.5%, which would be so much cheaper than the tax hit from an early withdrawal. One thing I'm curious about - for those who've taken 401k loans, how did it affect your overall retirement planning timeline? I'm wondering if having less money invested during a potential market recovery could impact long-term growth, even though you're avoiding the immediate tax penalties. Either way, this discussion has definitely saved me from making what could have been a $3,000+ mistake. Sometimes you need to hear from people who've actually been through these situations to really understand the implications!

Quick question - does anyone know if fanduel W-2G shows the amount wagered too or just the winnings? Trying to figure out if I need to manually calculate my losses or if it will be clear from the form.

This is a really common confusion! The key thing to understand is that the IRS treats gambling wins and losses separately, even if you're down overall. You'll need to report ALL your gambling winnings as income (even if you lost money net), but you can only deduct losses if you itemize deductions on Schedule A. The tricky part is that gambling losses can only offset gambling winnings - you can't use them to reduce other types of income. Since you mentioned being down $3000 overall but having some wins, make sure you're tracking each platform separately. FanDuel will send you a W-2G if any single win was $600+ and at least 300 times your bet. Other platforms have the same requirements. My advice: Start organizing your records now by platform and by date. You'll need documentation for every session if you want to claim those loss deductions. The IRS considers each day of gambling a separate "session," so group your activity accordingly. The good news is that if your gambling losses plus other itemized deductions (mortgage interest, charitable donations, etc.) exceed the standard deduction, you can offset those winnings. Otherwise, you might end up paying taxes on wins even though you lost money overall - which is unfortunately how the tax code works.

This is such a helpful thread! I've been putting off filing my taxes because I was dreading paying for software again, but Free Fillable Forms sounds perfect for my situation. I just have a W-2 and some basic deductions, so the lack of "hand-holding" shouldn't be a problem. One question though - does anyone know if there's a deadline for using Free Fillable Forms? Like, is it available all the way up to the tax deadline in April, or do they shut it down earlier? I tend to be a last-minute filer and want to make sure I'm not stuck scrambling for an alternative if I wait too long. Also really appreciate the tip about saving frequently - that's exactly the kind of thing I would forget to do and then regret later!

This is such great timing! I was just about to start working on my 2022 taxes and was dreading the cost of tax software. I have a pretty straightforward situation - just W-2 income and standard deduction - so Free Fillable Forms sounds perfect for me. I really appreciate everyone sharing their experiences here. The tips about saving frequently and double-checking all the numbers are exactly what I needed to know. And it's good to hear that it stays available through the deadline since I'm definitely more of a March filer than a February filer! One thing I'm curious about - for those who've used it multiple years, do you find it gets easier the second time around? I'm wondering if I'll remember the process better next year or if it's still going to feel like starting from scratch each time.

This is a really complex area of tax law that trips up a lot of students! You're absolutely right to be cautious about filing jointly without proper legal authority. One thing I'd add to the excellent responses here is that the IRS has become much stricter about these situations in recent years. While IRC Section 6013(a)(3) and Revenue Procedure 2013-34 do provide some pathways, the IRS will scrutinize the documentation very carefully. For your case study analysis, I'd recommend looking at the distinction between "temporary" vs "permanent" incapacity. The IRS tends to be more flexible with temporary situations (like someone in a coma who might recover) versus permanent conditions like severe dementia or psychiatric conditions. Also consider the timing issue - if the wife's condition developed after they normally would have filed, that creates additional complications compared to a situation where the incapacity existed at the time of filing. From a practical standpoint, even if they could technically file jointly with proper documentation, the safest recommendation is still to pursue formal guardianship. The cost of establishing guardianship is usually much less than the potential penalties, interest, and legal fees if the IRS rejects the return and treats it as improperly filed. Good luck with your case study - tax law intersecting with family law and mental health issues is genuinely one of the trickiest areas to navigate!

Great question about fluctuating conditions! The IRS generally requires documentation that shows the person was incapacitated at the time the return was due to be filed (typically April 15th), not just a general diagnosis. For conditions like bipolar disorder or severe depression, you'd need medical records or a physician's statement specifically addressing the person's capacity on or around the filing deadline. The IRS tends to look at whether the individual could understand the nature and consequences of filing the return at that specific time, rather than their overall diagnosis. This is why detailed medical documentation from the treating physician is so critical - it needs to speak to the person's functional capacity during the relevant time period. For current IRS guidance, check out Publication 17 (Your Federal Income Tax), which has a section on signing returns, and Internal Revenue Manual 21.6.6 which covers examination procedures for these situations. The IRS also has specific training materials for their agents in cases involving mental incapacity, though those aren't publicly available. One practical tip for your case study: if the psychiatrist's documentation can specifically state that the wife was "unable to understand the nature and consequences of signing a tax return due to her mental condition during the filing period," that carries much more weight than a general diagnosis. The key is being very specific about functional capacity at the relevant time, not just the existence of a mental health condition.