Just wanna add that if you're not making a profit for several years, the IRS might classify your farm as a hobby rather than a business. Generally, they expect you to show a profit in 3 out of 5 consecutive years (though the rule is 2 out of 7 years for horse operations). If you get classified as a hobby, you lose all those business deductions. So document EVERYTHING that shows you're trying to make a profit - your business plan, marketing efforts, education/training, improvements aimed at efficiency, etc.

Something that hasn't been mentioned yet is the importance of keeping a detailed activity log from day one. I learned this the hard way when the IRS audited my small farm operation three years in. They wanted to see proof that I was spending substantial time on legitimate business activities, not just weekend hobby farming. I'd recommend tracking your hours weekly - time spent researching markets, maintaining equipment, caring for animals, preparing land, etc. Also document any educational activities like attending farming workshops, reading agricultural publications, or consulting with extension agents. This creates a paper trail showing business intent even before you have revenue. One more tip: consider getting your farm business properly registered and obtaining any necessary licenses or permits for your area, even if you're not selling yet. Having official recognition as an agricultural operation strengthens your position if questions arise about business legitimacy.

I'd suggest getting a formal appraisal before making the final decision between selling vs. donating. If the dress truly has a fair market value of $2,500-3,000 (which seems reasonable for a $5,400 dress in perfect condition), and if your fiancée has other itemizable deductions that would push her over the standard deduction threshold, the tax benefit could be meaningful. But here's something to consider - if she's facing $13k in capital gains, that puts her in a higher tax bracket where charitable deductions provide more benefit. A $2,500 deduction could save her $550-625 in taxes (22-25% bracket) versus maybe getting $1,000-1,500 from a sale after months of trying. Also, don't forget about state tax benefits if your state allows charitable deductions. The combined federal and state tax savings might actually exceed what you could realistically get from selling it at this point. One more tip: if you do donate, consider doing it early in the tax year so you have time to make additional charitable donations if needed to maximize the itemized deduction benefit.

I've been through a similar situation with high-value donations and capital gains, so I wanted to share a few practical insights that might help. Regarding the appraisal cost - yes, you typically pay upfront (usually $150-300 for clothing items), but this cost is also tax-deductible as a miscellaneous expense related to tax preparation. So it doesn't completely eat into your savings. For timing, you're right that it just needs to happen before December 31st for that tax year. However, I mentioned doing it early because if the donation alone doesn't get you over the standard deduction threshold, you have time to plan other charitable giving throughout the year to maximize the benefit. One strategy I used: I bunched multiple years' worth of charitable giving into one tax year (donated items I was planning to give away over 2-3 years all at once). This pushed me well over the standard deduction threshold, making all the donations much more valuable tax-wise. Also, don't overlook that if she's in a high tax bracket due to capital gains, she might benefit from the Net Investment Income Tax (3.8%) reduction as well, which could add another layer of savings on top of the regular income tax benefit. The math really does favor donation in higher tax brackets, especially when you factor in both federal and state benefits.

Just wanted to mention that IRS letters come in different "flavors" - some are just informational, some require a response, and some are billing notices. The most important thing is to figure out which type you have: - Notice number starting with CP: Usually automated notices about specific account issues - Letter number starting with LTR: More personalized correspondence often requiring action - Notice numbers 501-504: Collection notices (more serious) Don't panic, but definitely don't ignore it! The IRS actually becomes much more reasonable when you communicate with them promptly.

If anyone's curious what different IRS letters mean, here's what I've received over the years: CP2000 - Proposed adjustments to tax (they found income you didn't report) CP14 - Balance due notice (you owe money) CP12 - Refund adjustment notice (they changed your refund amount) CP05 - EIC examination notice (they're reviewing your earned income credit) Each one tells you exactly what they need from you. Just follow the instructions and you'll be fine!

Anyone else notice that the percentage you get for the Saver's Credit varies based on your income? I was expecting the full 50% but only qualified for 10% because of my income level. Still better than nothing but kinda disappointing.

This thread has been super helpful! I'm in a similar situation as the original poster - first year with a 401k and completely confused about Form 8880. Just to make sure I understand correctly: if I only made contributions to my 401k (no withdrawals), I should look for my total contributions either in Box 12 of my W-2 (code D) or on my year-end 401k statement, right? And I can completely ignore all the questions about distributions and 1099-R forms since I didn't take any money out? Also, does anyone know if there's a maximum contribution amount that counts for the credit? I contributed about $8,000 this year and want to make sure I'm not missing anything.

Is anyone else annoyed that there's no clear instructions about this on Form 8889?? Like nowhere does it explicitly say "if your contributions were made through payroll, you don't get a deduction on line 13 because you already got the benefit." I've been doing this wrong for 3 YEARS!

I completely understand your confusion - this is one of the most common HSA tax issues! Let me break this down clearly: **Issue #1:** You're absolutely RIGHT that your taxable income should be $60,400 if you contributed $4,600 through payroll. The key is that you've ALREADY received this benefit! When HSA contributions are made through payroll deduction, they're excluded from your gross wages before your W-2 is even created. So your W-2 Box 1 should show $60,400, not $65,000. The zero on line 13 is correct because you don't need an additional deduction - you already got the tax benefit upfront. **Issue #2:** Lines 3 and 5 should show YOUR individual contribution limit of $4,600, not the combined $9,200. Each spouse fills out their own Form 8889 with their own limits. You're correct that line 6 should be $4,600. **The TaxSlayer mystery:** That $14,398 is definitely wrong! Sounds like the software may have incorrectly included health insurance premiums or other amounts that don't belong on Form 8889. The 2021 limit for individual coverage was only $3,600, so there's no way it should be that high unless there were catch-up contributions or rollovers involved. Double-check your W-2 Box 1 - I bet you'll find it's already reduced by your HSA contributions!